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Set up sales tax

If you're trying to turn on sales tax and set it up in QuickBooks for the first time, you're in exactly the right place!

Before you start

  • You may want to learn more about sales tax concepts. This will help you understand how QuickBooks uses sales tax items, rates, and codes to track the sales tax you collect from your customers and pay to your tax agency.

  • These instructions are long, but they'll help you set up your sales tax correctly while explaining things along the way. This procedure for setting up your sales tax involves three major steps. Because each major step has its own set of steps, it's a good idea to print this topic and refer to it as you complete your setup.

    Before you click the printer icon at the top of this topic, scroll through the topic and click all of the symbols so you'll have all of the text.

  • View a picture of the sales tax preferences, where you'll be setting up sales tax.

  • Make sure that sales tax is turned on.

    Topic goes here

Step 1: Sales tax items, rates, and tax agencies

Important: Be sure you understand sales tax items and rates and the difference between a single sales tax item (one flat rate) and a sales tax group item (one or more combined sales tax items), because, in many states, sales tax is charged for more than one tax district. You can set up both your single sales tax items and your sales tax group items from this window.

Note: Create a sales tax group only if you're paying multiple agencies, not if you're making one payment that will be split by the principal agency.

To set up a sales tax item and rate

  1. If you haven't already done so, open the sales tax preferences.

    To do this task

    1. Go to the Edit menu and click Preferences.

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

    3. Click the Company Preferences tab.

  2. In the Sales Tax Preferences window, click the Add sales tax item button.

    The New Item window opens with Sales Tax Item already selected in the Type drop-down list.

  3. Enter a sales tax name.

    Use a name that describes the location for the tax, such as XYZ County. This name appears as one of the choices in the Tax field on your sales forms.

  4. Enter a description for the way this sales tax item will appear as a line item on your sales forms.

    For example, XYZ County sales tax. The description prints on your sales forms after the final line item. You can't edit it on the forms themselves. Users frequently use the name of the sales tax item as the description.

  5. Enter the sales tax rate.

    The percentage you enter is the rate you charge when a sale is taxable. For example, your sales tax rate for XYZ County might be 8.25% (or 8 and 1/4 cents per dollar purchased). This rate also appears on your sales forms.

  6. In the Tax Agency drop-down list, click Add New.

    This will open the New Vendor window where you'll set up the tax agency (a vendor) to which you pay this sales tax.

  7. In the Vendor Name field, enter the name of your tax agency. For example, in California, sales tax is paid to the Board of Equalization.

    You can enter the other information now, such as the address and opening balance, or you can do it later.

  8. Click OK to close the New Vendor window.

  9. Click OK to close the New Item window.

  10. Repeat steps 1 through 9 for each sales tax item you need to set up for your business. Once you add a new sales tax item, it appears in the Most common sales tax drop-down list.

  11. (If necessary) When you're finished setting up all of your sales tax items, set up your sales tax group items.

    1. Click the Most common sales tax drop-down list and choose Add New.

    2. In the New Item window, click the Type drop-down list and choose Sales Tax Group Item.

    3. Enter a name and description for the group, similar to the way you named and described the individual sales tax items.

    4. In the table at the bottom of the window, select the Tax Item column drop-down list, and choose the first sales tax item for this group item. Repeat this step for each sales tax item that is part of this sales tax group item.

    5. When you're finished adding sales tax items to the table, click OK.

    6. Repeat steps a through e for each sales tax group item you need to set up.

  12. When you're finished setting up all of your sales tax items, click the Most common sales tax drop-down list again and choose the sales tax item that you use most frequently for your sales. Your choice will be used as the default sales tax item and rate on all of your sales forms. If necessary, you can change this setting for any particular sale.

  13. If you already set up your items and customers, you'll be prompted to assign a taxable sales tax code to all of them. Click OK if most of your items and customers are taxable. If most of your items or customers aren't taxable, clear the appropriate checkboxes and then click OK. Later, if necessary, you can change the sales tax code for those items and customers that don't match the setting you chose.

Step 2: Sales tax codes (taxable and non-taxable status)

Now you'll set up the default sales tax codes that will be used to track the taxable and non-taxable sales of your products and services.

Depending on your state and local sales tax requirements, the preset taxable (TAX) and non-taxable (NON) sales tax codes you see may be the only ones you'll need . Later, after you're finished with this setup, you'll assign these sales tax codes to your customers and the items you sell.

If your tax agency requires you to specify additional sales tax codes to track taxable and non-taxable sales, such as for non-taxable out of state sales, we recommend that you set them up now. You also can set them up later when you need to use them.

To set up additional sales tax codes

  1. Still in the Sales Tax Preferences window, click the Taxable item code or Non-Taxable item code drop-down list (depending on the type of sales tax code you want to set up) and then click .

  2. In the New Sales Tax Code window, enter a 3-digit sales tax code you want to add and a description for it.
    Examples of non-taxable sales tax codes

    Topic goes here
  3. Click OK.

  4. Repeat steps 1 through 3 for each sales tax code you need to set up.

  5. When you're finished setting up all your sales tax codes, click the Taxable item code and Non-Taxable item code drop-down lists again and choose a default sales tax code to use for each of them.

  6. Decide whether or not you want to mark your taxable items with a T when your sales forms are printed. If not, clear this checkbox. Many businesses prefer to show which items are taxable and which are not on their invoices and sales receipts, but the choice is really up to you.

Step 3: Sales tax payment schedule

You'll set up information about when you need to pay your tax agency. (In QuickBooks, a tax agency is considered a vendor.)

  1. Still in the Sales Tax Preferences window, in the When do you owe sales tax? section, select when you owe your sales tax to the tax agency, as specified by the tax agency.

    Although this preference is usually set only once (at setup time) you may need to change it back and forth for your reports. More ...

    Topic titled "Owe Sales Tax preference" goes here
  2. In the When do you pay sales tax? section, select how often you need to make your sales tax payments to the tax agency, as specified by the tax agency.

    The time interval you select is used for the period of time covered by your sales tax reports and sets reminders to pay your sales taxes. More ...

    For example, if you select Monthly, QuickBooks uses the transactions entered for the previous month as the basis for your sales tax report calculations. When you're ready to pay your sales taxes, the amount of sales tax due for the previous month is displayed in the Pay Sales Tax window.

    If you don't know which time period to choose, check your sales tax license. It should indicate the payment schedule that you need to use.

    Occasionally your tax agency may change your schedule, usually based on how much sales tax you're collecting over your current payment interval. If this happens, you need to return to these sales tax preferences and change the interval here.

    If you collect sales tax for multiple tax agencies that require payment at different intervals, select the payment interval you use most frequently. When you run your sale tax reports and make your payments, you'll be able to see which amounts are due on which dates.

  3. Click OK to apply your sales tax preferences.

See also

KB ID# H_SALES_TAX_TASK_SETUP_SALES_TAX
12/7/2016 12:33:52 AM
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