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QuickBooks sales tax terminology

Use this list for quick reference when setting up sales tax in QuickBooks.


How it relates to sales tax setup

tax district

A town, city, county, or state that charges sales tax. A tax district may also include a municipal or special jurisdiction, such as a Mass Transit tax or a parish in Louisiana.

tax agency

The government office that determines the requirements for sales tax collection and payment. You may need to pay your collected sales tax to one or more tax agencies, depending on the requirements for the locations (tax districts) where you do business. Tax agencies are set up as vendors, because you make payments to them. A tax agency is sometimes called a tax authority.

sales tax code

The identifier that QuickBooks uses to track the taxable and non-taxable status of both the products and services you sell, and the customers to whom you sell these items. For example, a customer that is a non-profit organization would have a non-taxable status. You would not charge sales tax for anything you sell to this particular customer. You can see all of your sales tax codes in the Sales Tax Codes List.

sales tax item

A QuickBooks item that is used to calculate the appropriate sales tax for a sale. A sales tax item includes a sales tax rate and a tax agency. When you sell taxable items, you charge the appropriate sales tax rate by assigning a sales tax item to each sale.

sales tax rate

The percentage charged for sales tax by the tax district. For each different district/rate combination, you need to set up a new sales tax item. For example, you may sell in three counties that all charge the same sales tax rate, but you need a separate sales tax item for each county, even though the sales tax rate is the same. This allows you to track the amounts of sales tax you collect for each tax district.

sales tax group item

A QuickBooks item that groups multiple sales tax items so you can charge only one rate on your sales. For example, the location where you sell may require you to charge both a county and a state sales tax. However, customers are used to seeing one sales tax rate on sales. You would set up a sales tax group item that combines those two sales tax rates, say 1% for the county and 7% for the state, to create a single, sales tax group item with a rate of 8%. You would apply this sales tax group item to your taxable sales for that county. A sale tax group item also allows you to track the separate sales tax rates on your reports so that you can pay the appropriate amounts to the appropriate tax agencies.

See also

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