QUICKBOOKS DESKTOP 2019 CLIENT TRAINING

Lesson 11
Track and Pay Sales Tax
Copyright

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QuickBooks Desktop 2019 Client Lesson Table of Contents

Table of Contents

About the Author ....................................................................................................................... 4

Lesson Objectives ...................................................................................................................... 5

Overview of Sales Tax in QuickBooks ....................................................................................... 6

Set Up Your Tax Rates and Agencies ......................................................................................... 7

Group Single Taxes Together .................................................................................................... 9

Identify Your Most Common Tax ............................................................................................. 10

Indicate Who and What Gets Taxed......................................................................................... 12

Apply Tax to Each Sale ............................................................................................................ 15

Determine What You Owe ....................................................................................................... 16

Pay Your Tax Agencies ............................................................................................................ 19

Track and Pay Sales Tax — Review Questions .......................................................................... 20

Review Activities ..................................................................................................................... 21

Answers to Review Questions ................................................................................................. 22

Lesson 11 — Track and Pay Sales Tax 3

QuickBooks Desktop 2019 Client Lesson About the Author

About the Author

Esther Friedberg Karp, MBA

President, EFK CompuBooks Inc.

[email protected]

Esther Friedberg Karp is an internationally-renowned trainer, writer, business consultant and speaker
who was named one of the Top 10 QuickBooks ProAdvisors in the world, with the title Top
International ProAdvisor.

Based in Toronto, Canada, Esther has the unique distinction of holding ProAdvisor certifications in
the United States, Canada and the United Kingdom. She has authored materials and delivered
educational and certification courses for Intuit in all those countries, as well as Australia where she
conducted live QuickBooks Online training. She has spoken at Scaling New Heights, QuickBooks
Connect and other conferences, as well as those of various accounting and professional
organizations and written countless articles for Intuit Global.

Esther counts among her clients’ companies from around the world, as well as accounting
professionals who seek her out on behalf of their own clients for her expertise in various countries’
editions of QuickBooks Desktop and Online, and for her talent in customizing QuickBooks usage for
different industries.

Esther holds a BSc from the University of Toronto in Actuarial Science and Mathematics, and an MBA
in Marketing and Finance from York University’s Schulich School of Business.

She can be reached at [email protected] or 416-410-0750.

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QuickBooks Desktop 2019 Client Lesson Lesson Objectives

Lesson Objectives

• Get an overview of sales tax in QuickBooks (the steps involved in tracking, collecting and
paying it)

• See how to set up QuickBooks to track sales tax

• See how to apply sales tax to a sale
• Learn how to determine a business’s sales tax liability
• Write a QuickBooks check to the appropriate tax agency for sales tax liability

Lesson 11 — Track and Pay Sales Tax 5

QuickBooks Desktop 2019 Client Lesson Overview of Sales Tax in QuickBooks

Overview of Sales Tax in QuickBooks

Step-by-Step: Use QuickBooks to Track and Pay Your Sales Tax

1. Set up your tax rates and agencies.

2. Indicate who and what gets taxed.

3. Apply tax to each sale.

4. Find out what you owe.

5. Pay your tax agencies.

NOTES

Lesson 11 — Track and Pay Sales Tax 6

QuickBooks Desktop 2019 Client Lesson Set Up Your Tax Rates and Agencies

Set Up Your Tax Rates and Agencies

Some businesses need to apply more than one sales tax to their sales; for example, they may collect
state sales tax as well as several county sales taxes. You need to create a separate sales tax item for
each tax amount you must report (not necessarily for each tax you collect; some states want you to
report state sales tax and county sales tax as separate items, while others let you report them as
one item).

Even if you’re paying more than one type of tax, you usually want your customers to see one overall
tax amount, not separate taxes for the state and county. You’ll learn how to do that in this lesson.

Step-by-Step: Add a Sales Tax Item

1. From the Lists menu, choose Item List.

2. Click the Item menu button, and then choose New.

3. In the Type field, choose Sales Tax Item.

4. In the Sales Tax Name field, type the appropriate name for the tax (e.g., Seattle City Tax, King
County Tax, Washington State Tax, etc.)

5. In the Description field, enter an appropriate description for the tax.

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QuickBooks Desktop 2019 Client Lesson Set Up Your Tax Rates and Agencies

6. In the Tax Rate (%) field, enter the sales tax rate as a percentage.

7. In the Tax Agency field, type the name of the department to which you remit the taxes (you might
have to choose to Quick Add or Set Up this new vendor/tax agency if it’s not already in your
vendor list).

8. Click OK.

NOTES

Lesson 11 — Track and Pay Sales Tax 8

QuickBooks Desktop 2019 Client Lesson Group Single Taxes Together

Group Single Taxes Together

Even if you collect a combination of sales taxes which you report separately, you probably don’t want
to confuse customers by showing separate taxes on your invoices or sales forms. QuickBooks lets
you group some or all your tax items so customers can see a single combined tax amount. In
addition to ensuring you have created all sales tax items required, you’ll be creating a sales tax
group.

Step-by-Step: Create a Sales Tax Group

1. With the Item List displayed, click Item  New.

2. In the Type field, choose Sales Tax Group.

3. In the Group Name/Number field, enter an appropriate name for the group.

4. In the Description field, enter an appropriate description for the group.

5. Click in the Tax Item column then choose the taxes you wish to group together.

6. Click OK.

Lesson 11 — Track and Pay Sales Tax 9

QuickBooks Desktop 2019 Client Lesson Identify Your Most Common Tax

Identify Your Most Common Tax

If you want QuickBooks to apply sales tax to your invoices and sales receipts, you have to tell it which
sales tax item or group is the one you use most often. Once you do that, QuickBooks applies that
sales tax when you fill out an invoice or a sales receipt. (You can choose a different sales tax on the
sales form if you don’t want the default tax.)

Step-by-Step: Set up a Default Sales Tax

1. Make sure you are signed in to the QuickBooks company as the Admin user. (If other users have
been set up on other computers to access the company in multi-user mode, ensure they are not
signed in and you are in single-user mode.)

2. From the Edit menu, choose Preferences.

3. In the Preferences window, click the Sales Tax icon in the left panel then click the Company
Preferences tab.

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QuickBooks Desktop 2019 Client Lesson Identify Your Most Common Tax

4. In the Your most common sales tax field, choose the sales tax rate you want to be the default.

5. Click OK.

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QuickBooks Desktop 2019 Client Lesson Indicate Who and What Gets Taxed

Indicate Who and What Gets Taxed

The next step in setting up sales tax is to indicate who and what gets taxed. You have to tell
QuickBooks whether or not a customer is taxable and assign a default sales tax item or sales tax
group to that customer.

You must also distinguish between taxable and non-taxable items on the Item List. When you add an
item to the Item List, there’s a place in the window to indicate whether you charge tax for that item.
QuickBooks remembers this information and shows whether or not an item is taxable when you
enter the item on a sales form.

Step-by-Step: Indicate a Taxable Item

1. In the Item List, right-click the item for which you wish to check taxable status, then click Edit
Item. (Or highlight the item you want, and then click the Item menu button at the bottom, and
then choose Edit Item.)

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QuickBooks Desktop 2019 Client Lesson Indicate Who and What Gets Taxed

The code in the Tax Code field for this item tells you whether this item is taxable. When you
choose the item to be included on a sales form, QuickBooks knows if this item is taxable and, if it
is, automatically applies the default sales tax.

2. Click OK to close the Edit Item window.

3. Close the Item List.

IMPORTANT: Customer taxability will override item taxability. For example, if you have taxable items on
an invoice to a customer marked as a non-taxable customer, sale tax will not be calculated on the
invoice. See the next section re: taxable/non-taxable customers.

NOTES

Lesson 11 — Track and Pay Sales Tax 13

QuickBooks Desktop 2019 Client Lesson Indicate Who and What Gets Taxed

In the same way you can specify that an item in the Item List is taxable, you can indicate whether or
not a particular customer is taxable or non-taxable in that customer’s record.

Step-by-Step: See an Existing Customer Record

1. Open the Customer Center.

2. Right-click on the name of the customer you wish to view, then click Edit Customer.

3. Click the Sales Tax Settings tab.

In the image below, the tax code selected indicates transactions with this customer are subject to
sales tax. When this customer was set up, the default tax rate for this customer was assigned
automatically based on the company preference; however, you can manually set the sales tax
item to be assigned to this customer.

4. To change the sales tax item, use the Tax Item drop-down and assign the proper rate.

5. Click OK.

6. Close the Customer Center.

NOTES

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QuickBooks Desktop 2019 Client Lesson Apply Tax to Each Sale

Apply Tax to Each Sale

If you’ve set up a default sales tax, assigned taxes to your customers and marked items you sell as
taxable, QuickBooks automatically calculates and applies the tax when you make a sale.

There are three factors affecting how sales tax is accrued on an invoice. First, the item taxability (the
Tax column in the body of the invoice) will determine whether the item is subject to sales tax. Next,
the Tax Item decides which rate is assigned and how the sales are grouped on the sales tax reports.
Lastly, the Customer Tax Code determines if the customer is actually charged sales tax or if it is
reported in the Non-taxable Sales column of the Sales Tax Revenue Summary and Sales Tax Liability
reports.

While there are places to set defaults for these tax settings, you can also overwrite what comes up
tax-wise on each individual invoice. This is important to understand if your business works in multiple
states and is a combination wholesaler/retailer.

NOTES

Lesson 11 — Track and Pay Sales Tax 15

QuickBooks Desktop 2019 Client Lesson Determine What You Owe

Determine What You Owe

If you’re required to collect sales tax from customers, you also have to make periodic payments of
the sales tax you’ve collected. QuickBooks gives you three ways to determine the amount of your
sales tax liability: The Sales Tax Liability report, the Sales Tax Payable register and the Pay Sales Tax
window.

Step-by-Step: Create the Sales Tax Liability Report

1. Click the Manage Sales Tax icon from the Home page, and then click the Sales Tax Liability
hyperlink (or from the Reports menu, choose Vendors & Payables  Sales Tax Liability).

2. In the Dates fields, set the parameters for the period you need to view.

The Sales Tax Liability report shows the total taxable sales, total non-taxable sales, and the
amount of sales tax you owe each tax agency as of the ending date in the date range.
QuickBooks displays the Sales Tax Liability report on an accrual basis, unless you changed the
default setting in the Sales Tax Preferences window. The report shows exactly how much sales tax
you collected.

3. Close the Sales Tax Liability report.

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QuickBooks Desktop 2019 Client Lesson Determine What You Owe

4. If QuickBooks asks if you want to memorize the report, click No.

BEST PRACTICE: Compare the Profit & Loss report income total to the total sales in the Sales Tax
report for the same time frame and on the same basis. This will help you find any
discrepancies or incorrectly posted income.

If you’d like to see where your sales tax revenue is coming from, you can run the Sales Tax Revenue
Summary report, which shows you the sources of all taxable and non-taxable sales transactions
broken down by individual sales tax codes. This report is especially helpful if you are using sales tax
groups.

Step-by-Step: Run the Sales Tax Revenue Summary Report

1. Click the Manage Sales Tax icon from the Home screen then click the Sales Tax Revenue
Summary hyperlink (or from the Reports menu, choose Vendors & Payables  Sales Tax
Revenue Summary).

2. In the Dates fields, set the parameters for the period you need to view.

3. Close the report.

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QuickBooks Desktop 2019 Client Lesson Determine What You Owe

Each time you write an invoice or sales receipt that includes sales tax, QuickBooks enters the
information in the Sales Tax Payable register. QuickBooks keeps track of transactions for all tax
vendors in the same Sales Tax Payable account.

Step-by-Step: See the Sales Tax Payable Register

1. From the Company menu, choose Chart of Accounts (or press CTRL+a).

2. Double-click Sales Tax Payable to open the register.

Each entry in the register is a single tax transaction. Taxes you record on invoices and sales
receipts appear as increases; payments you make to tax agencies appear as decreases. The
ending balance of the register is your current tax liability. Notice how some transactions have the
same invoice number. When you record two tax rates on the same invoice or cash sale, the
register shows a separate transaction for each tax agency. (This is because you have to make
separate payments to individual tax agencies.)

3. Close the register.

4. Close the Chart of Accounts.

NOTES

Lesson 11 — Track and Pay Sales Tax 18

QuickBooks Desktop 2019 Client Lesson Pay Your Tax Agencies

Pay Your Tax Agencies

When it's time to pay sales tax, you use the Pay Sales Tax window to write a check to your tax agency
or agencies.

Step-by-Step: Make a Sales Tax Payment

1. Select Vendors from the menu bar, click Sales Tax  Manage Sales Tax (or click the Manage
Sales Tax icon from the Home page).

2. In the Manage Sales Tax window, click the Pay Sales Tax button.

3. In the Show sales tax due through field, enter the ending date of the period you wish to pay.

QuickBooks displays tax agencies and the amounts you owe as of that date.

4. To mark them for payment, click the Pay All Tax button.

5. Click OK. QuickBooks has now created transactions to pay the sales tax liability.

6. Close the Manage Sales Tax window.

IMPORTANT: In some cases, you may have to make an adjustment to these amounts so your payment in
QuickBooks matches your amount due to the tax agency. These adjustments are generally due to usage
tax or other excise taxes. Use the Adjust button to add your adjustments before calculating the other
rates as the adjusting transaction will reset all amounts in the window.

Lesson 11 — Track and Pay Sales Tax 19

QuickBooks Desktop 2019 Client Lesson Track and Pay Sales Tax — Review Questions

Track and Pay Sales Tax — Review Questions

1. Which of the following statements is false?

a. You can set up both taxable and non-taxable items.

b. You can associate different sales tax rates with different customers.

c. QuickBooks automatically sets up your sales tax rates based on the city and state you enter in
the Company Information window.

d. All of the above

2. Use a ______________________________________________ item to combine multiple sales tax

items into one amount on sales forms.

3. Which of the following can you use to determine your sales tax liability?

a. Sales Tax Payable account register

b. Pay Sales Tax window

c. Sales Tax Liability report

d. All of the above

4. To affect sales tax liability correctly, you should make payments to tax collecting agencies from
which QuickBooks window?

a. Write Checks

b. Pay Sales Tax

c. Either a or b

d. None of the above

5. In what part of QuickBooks do you assign sales tax codes and items to customers?

a. In the Sales Tax Code list

b. On the Customer tab of the New or Edit Item window

c. On the Sales Tax Settings tab of each customer’s record in the Edit Customer window

d. None of the above

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QuickBooks Desktop 2019 Client Lesson Review Activities

Review Activities

1. Create an invoice for Pretell Real Estate’s 155 Wilks Blvd. job for 10 interior wood doors and
two exterior wood doors.

2. After you record the invoice, open the Sales Tax Payable register to see how QuickBooks has
recorded the tax due from the invoice.

Lesson 11 — Track and Pay Sales Tax 21

QuickBooks Desktop 2019 Client Lesson Answers to Review Questions

Answers to Review Questions

1. Which of the following statements is false?

a. You can set up both taxable and non-taxable items

b. You can associate different sales tax rates with different customers

c.  QuickBooks automatically sets up your sales tax rates based on the city and state you enter
in the Company Information window.

d. All of the above

2. Use a sales tax group item to combine multiple sales tax items into one amount on sales forms.

3. Which of the following can you use to determine your sales tax liability?

a. Sales Tax Payable account register

b. Pay Sales Tax window

c. Sales Tax Liability report

d.  All of the above

4. To correctly affect sales tax liability, you should make payments to tax collecting agencies from
which QuickBooks window?

a. Write Checks

b.  Pay Sales Tax

c. Either a or b

d. None of the above

5. In what part of the program do you assign sales tax codes and items to customers?

a. In the Sales Tax Code list

b. On the Customer tab of the New or Edit Item window

c.  On the Sales Tax Settings tab of each customer’s record in the Edit Customer window

d. None of the above

Lesson 11 — Track and Pay Sales Tax 22