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Track taxable and non-taxable sales using sales tax codes

About sales tax

QuickBooks uses sales tax codes to track the taxable or non-taxable status of both the items you sell (products and services) and your customers. If your tax agency requires you to report the reasons why particular sales are taxable or non-taxable (and many do), the sales tax codes that you assign to your items and customers allow you to run reports that provide this information for your sales tax return.

When you turn on sales tax, QuickBooks creates two sales tax codes for you:

  • Use the taxable code (TAX) for items and customers that are taxed.

  • Use the non-taxable code (NON) for items and customers that are not taxed, such as non-profit organizations or items that the customer plans to resell. Non-taxable sales tax codes are also used for some out-of-state sales.

For many businesses, these two preset sales tax codes are the only ones needed. You can add additional sales tax codes to accommodate other reasons for charging (or not charging) sales tax on your transactions. You then assign the appropriate sales tax code to each of the products and services you sell, and to each of your customers.
Examples of non-taxable sales tax codes

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Note: A customer's sales tax code always overrides an item's sales tax code. For example, if you are selling a taxable item to a non-profit customer, the item would not be taxed.

See also

KB ID# H_SALES_TAX_INFO_TRACK_WITH_CODES
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