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How does QuickBooks calculate sales tax for a sales tax group item?

When you use a sales tax group item (multiple flat-rate sales tax items that are combined and charged as one sales tax rate), QuickBooks calculates each sales tax rate individually, then rounds off each individual total before adding them together to give the total sales tax that is charged.

For example:

You have an invoice with taxable sales of $69.62, and a sales tax group item that combines sales tax items with flat rates of 4% (state) and 2% (county). Here's how QuickBooks does the math:

4% X $69.62 = 2.785 rounded to $2.78
2% X $69.62 = 1.392 rounded to $1.39

In the above example, the sales tax group item rate is 6% (4% + 2% = $4.18) but the combined total tax amount for the two separate items is $4.17, which results in a difference of one cent.

Don't worry about this discrepancy. The separate calculations are done so that the amounts for the individual sales tax items are calculated correctly for your sales tax liability report and your sales tax payments. You do not need to make an adjustment.

First, the sales tax for each line item calculated, then the tax amounts for each line are added and the rounded to the nearest penny.

On an invoice with 5 line items, VAT is calculated on 3 line items to which the standard rate of VAT applies. The VAT on these 3 line items is then totalled and rounded to the nearest penny. VAT is calculated separately on the other 2 line items, to which VAT at the reduced rate applies. The VAT on the 2 line items is then added and rounded to the nearest penny.

The standard and reduced rate amounts of VAT are then added together and shown at the bottom of the invoice in the Total VAT field.

See also

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