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Adjust the sales tax you owe

Use these instructions to record a discount, credit, fine, penalty, rounding error, etc. to the sales tax you owe.

Examples of when you need to do this task

You will need to make an adjustment to your sales tax liability (what you owe) if any of the following has occurred:

  • You received a credit because you overpaid your previous sales tax payment.

  • Your state or local government allows you to deduct the amount of sales tax paid to vendors or suppliers when you're reselling the products you purchased from them.

  • Your tax agency allows a discount for making an early sales tax payment.

    Many states allow an early payment discount (from .05% to as much as 3%). Other states allow a credit to compensate small business owners for collecting and remitting the sales tax.

  • Your tax agency charged a fine, penalty, or interest because you made a late payment, didn't file on time, or did not pay your sales tax.

    The Utah State Tax Commission has a minimum penalty of $20 and a maximum penalty of 10% of the unpaid tax. In addition, interest is charged at the rate prescribed by law from the original due date until paid in full.

  • You need to account for sales tax calculation rounding differences between QuickBooks and your state sales tax form.

    Many users calculate the sales tax on their state's sales tax form and get a different amount owed than QuickBooks shows.

    The difference may be over or under by a few cents or dollars, particularly if you use sales tax group items. Make a sales tax adjustment in QuickBooks to account for any differences.

  • Your tax agency has a threshold over which a different sales tax rate applies.

  • Your tax agency has a sales tax holiday.

To pay a penalty or fine that you don't need to include on a sales tax return, simply write a cheque to the sales tax agency from an expense account that you create for this purpose.

In general, you make a sales tax adjustment to:

Move money into or out of a sales tax liability account

For example, to
  • pay a penalty or fine that you need to include on the sales tax return

If your specific task is not listed, see How to adjust your sales tax liability (what you owe)

Assign sales tax amounts to a line items

See also

To adjust the sales tax you owe

  1. If the Pay Sales tax window is open, click Adjust.

    Otherwise, go to the Vendors menu, click Sales tax, and then click Adjust Sales tax Due.

  2. Choose an Adjustment Date.

  3. Fill in the Entry No. field. More ...

    If this is the first time you're entering any type of adjustment (including general journal entries), the Entry No. field will be blank. Enter a number for your adjustment. Many users enter GJE1 (for General Journal Entry 1). Any subsequent adjustments will increment this number automatically. This number appears on reports that include the sales tax adjustment and is also useful for finding adjustments.

    What if the number is the same as the last time?

    QuickBooks numbers all adjustments automatically (including general journal entries), incrementing the number each time you make an entry. If this preference is turned off, the number will be the same as for your last adjustment. To turn the automatic numbering preference back on:

    1. Go to the edit menu and click preferences.

    2. In the Preferences window, click Accounting in the list on the left.

    3. Click the Company Preferences tab.

    4. Select the "Automatically assign general journal entry number" checkbox and click OK.

  4. (Optional) If you track classes, the Class drop-down list appears so you can assign a class to this adjustment.

  5. Click the Sales tax Vendor drop-down list and choose the tax agency to which the adjustment applies.

  6. Click the Adjustment Account drop-down list and choose an adjustment account.

    Which account should I use?

    Don't use the Sales tax Payable account; the adjustment won't post correctly. Instead, choose one of the following:
    • If you're making the adjustment because you received a credit or need to apply a discount, choose an income account, such as Other Income.

    • If you're making the adjustment for a fine, penalty, or interest due, choose an expense account, such as Interest Expense or Non-deductible Penalties.

    • If you're adjusting for a rounding error, choose either an income account (for a negative error) or an expense account (for a positive error). Some users also set up a special account for rounding errors or they use the Miscellaneous Expense account.

  7. In the Adjustment section, select whether you want to increase the sales tax (for a penalty, fine, or interest) or decrease it (for a credit or discount), then enter the amount.

  8. (Optional) Enter a memo to describe the adjustment.

  9. Click OK.

    Important: If you made the adjustment by clicking Adjust in the Pay Sales tax window, any tax agency that you had previously checked will need to be selected again. Otherwise, the sales tax payment check won't be recorded.

See also

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