How to Record Sales Tax Payment in QuickBooks Desktop/Online

In the world of business and finance, managing sales tax is crucial for maintaining accurate financial records and complying with tax regulations.

Sales tax is a consumption tax imposed by the government on the sale of goods and services. It is calculated as a percentage of the purchase price and varies based on the location and type of products or services.

The sales tax rates can differ significantly from one jurisdiction to another, and some items or services may be exempt from sales tax altogether. Businesses are responsible for collecting and remitting the sales tax to the appropriate government entity, which adds a layer of complexity to their operations.

When you collect sales tax from customers on behalf of tax agencies, you will be required to turn those payments over to them. QuickBooks Online Sales Tax Center makes it easy for you to track sales tax liabilities collected, for each tax jurisdiction, the tax payments you have already made, and the balance due.

The Sales Tax Center is the best place to record sales tax payments because you can see all your recent payments on a single page. You can view your sales tax owed by monthly, quarterly, or annually, and adjust which period you need. You can also adjust your accounting basis – cash or accrual.

For consumers, Sales tax can impact the final price of goods and services and affect their purchasing. This is where they need to understand the intricacies of sales tax to make informed financial decisions.

How Is Sales Tax Calculated?

The calculation of sales tax involves multiplying the sales tax rate by the purchase amount, resulting in the tax amount to be added to the total cost.

Total Sales Tax = Cost of item x Sales tax rate

This process generally requires determining the applicable tax rate, which depends on location and type of goods or services. Once the rate is established, it’s typically expressed as a percentage, such as 7% or 8.5%. To compute the tax amount, simply multiply the purchase amount by the sales tax percentage. For example, if an item costs $100 and the sales tax rate is 8%, the tax amount would be $8, and the total cost would be $108.

Why is It Important to Record Sales Tax Payments in QuickBooks?

Recording sales tax payments in Quickbooks is crucial for maintaining accurate financial records, ensuring compliance with tax regulations, and facilitating streamlined tax reporting processes. It plays a vital role in ensuring that all sales tax liabilities are accurately accounted for and paid on time, preventing any potential fines or penalties for non-compliance.

By recording sales tax payments within QuickBooks, businesses can easily track and report their financial obligations, ultimately improving their overall financial management. This seamless integration allows for efficient reporting, which is essential for providing a clear picture of the company’s financial health and meeting government regulations.

What are the different types of sales tax payments in QuickBooks?

Sales tax is an additional cost added to the price of goods and services that’s passed on to a governing body.

In QuickBooks, sales tax payments include State Sales Tax, County Sales Tax, City Sales Tax, Liability Sales Tax (total tax owed), and Special Sales Tax categories for specific items.

But not all sales taxes are similar to each other Here are the key types of sales tax payments in QuickBooks:

• State Sales Tax: This is the largest portion of your overall sales tax. It gets paid to the state where your business operates.
• County Sales Tax: On top of state sales tax, some counties have their own add-on tax. This varies from county to county.
• City Sales Tax: This is the tax charged by your city or local government. Like county taxes, city sales tax depends on the area.
• Liability Sales Tax: The total amount of tax debt owed to a government by an individual, corporation, or other entity including state, county, and city taxes.
• Special Sales Tax Category: Sales tax categories provide a way to group various sales (inventory) items for tax calculations.

Steps to Record a Sales Tax Payment in QuickBooks

The tax center has everything you need to manage, adjust or file tax in QuickBooks. You can run reports for your sales tax liabilities, record or edit sales tax payments, and see your payment for different time periods. Here’s how to manage, record, adjust or delete tax sales tax payments in QuickBooks. Let’s get started.

To record a sales tax payment in QuickBooks, review your owed taxes, file your return with the tax agency, and record the payment. Adjust or delete payments as needed to keep records accurate.

Following the step-by-step information below:

Step 1: Review what you owe

If you haven’t already, make sure everything is correct before you file.

1. Navigate to Taxes and then choose Sales tax.
2. Check which return is due this month, then select the View Tax Return option.
   Note: If you need to file an older return, click on the Tax Period Date dropdown menu to opt for a tax period or custom date range.
3. After this, click on the appropriate option from the Filing period drop-down.
4. Update the dates in the End date and Filing date fields.
5. If you need to add an adjustment for things like credits, discounts, or corrections, select Adjust for the item in the list that you want to add as an adjustment. Fill up the adjustment details in the form, and press Save. The adjusted value gets updated in your return.
6. Write down your gross sales, nontaxable and taxable sales, tax due, and adjustment amount (if you added one). You’ll need these numbers later when you fill out your sales tax return form.
7. Once done with updating the details in the returns, choose Mark as filed.
8. Hit the Continue tab.

Note: If you need a detailed look at what you owe, run your sales tax liability report for the same sales tax period. This is helpful if you want to review your taxable and nontaxable invoices, receipts, and other transactions.

The sales tax report will change depending on the province you choose. For example, if you select sales tax for Quebec, then you can choose the GST/QST Detail report.

Review Sales Tax Reports

Get a Tax liability Report

1. Head to Taxes and select Sales tax.
2. Choose View sales tax liability report under the Related Tasks list. 

Note: The report shows each sales tax agency, the taxable amount of sales, and payments.

See all of your Tax Payments

1. Navigate to Taxes and then choose the Sales tax option. 
2. Hit the Payments tab and press View to view the list of payments.

Note: This will open a transaction report that lists all your tax payments in the Recent Sales Tax Payments section. You can adjust the date range or customize to further refine the report.

Step 2: File your Return with the right tax agency

Once you review your sales tax, you can e-file your return on your tax agency’s website, or file by mail. Most provinces encourage businesses to e-file. But if you can’t file online, you can check your tax agency’s website for more info on how to mail your return. While you can’t e-file right in QuickBooks, you need to manually enter your tax payment in QuickBooks as soon as you file to keep your sales tax info up to date.

1. Head to your tax agency’s website to file your return online. If you haven’t yet, you might have to sign up for your state’s e-filing service.
2. Now, fill out your sales tax return form and write down the gross sales, taxable sales, and sales tax due amounts as you entered earlier. 
3. At last, filing your sales tax return.

Step 3: Manage Sales Tax Payments

Record a sales tax payment in QuickBooks 

1. Navigate to Taxes and then select Sales tax.
2. Under the Sales Tax Owed list, choose the tax agency you’re recording the payment for and then hit the Record Tax Payment icon.
3. Select the account you’re making the payment from in the Bank Account drop down menu.
4. After this, click on the Payment Date.
5. Type the tax payment amount in the Tax Payment field.

6. Once you’re ready, choose Record Tax Payment. If you want to print a check for the payment, mark the Print a Check checkbox and then select Record Payment and Print Check.

Record a sales tax payment Manually in QuickBooks

Once you’re done filing, it’s time to keep your sales tax info up to date in QuickBooks. Here’s how to manually record your sales tax payment to zero out your sales tax payable.

1. Hover over Taxes and then choose Sales tax.
2. locate the return you just filed and select View Tax Return.

Note: If you paid for an older return, click on the Tax Period Date dropdown menu to select a tax period or custom date range.

3. Opt for a filing method, then select Record payment.
4. After this, add these payment details:

• Tax Amount
• Payment date
• Bank account

5. Choose the Record payment option.
6. Then, select Back to the Sales tax center.

Step 4: Adjust a sales tax payment

You can make an adjustment while filing your taxes. For this, click on Prepare Return under the Fillings tab. On the Prepare sales tax return page, select Adjust. Use this when you need to decrease or increase the amount of sales tax payment for things like credits, discounts, fines, interest, penalties, and corrections for rounding errors.

If you need to make an adjustment, navigate to Taxes, in the Returns tab, choose the Tax Adjustment option. The Journal Entry window opens and you can use this when you need to decrease or increase the amount of tax payment for things like credits, discounts, fines, interest, penalties, and corrections for rounding errors.

Once done, enter the adjustment amount and reason for the adjustment. You can type a positive or negative amount. Then select an account to track the adjustment.

Don’t select the sales tax Payable account. Instead, use the following:

• Credit or applying a discount: Select an income account, such as Other Income.
• Fine, penalty, or interest due: Opt for an expense account.
• Rounding error: Choose an income account for negative errors, or an expense account for positive ones.

Step 5: Check your filing status

If you filed online, navigate to your tax agency’s website to check your return’s filing status. However, in case you filed by mail, you can also call your tax agency directly to get an update on your return.

Step 6: Delete a sales tax payment

1. Head to Taxes and then choose Sales tax.
2. Now, select the payment you want to delete from the Recent Sales Tax Payments list and then click on Delete Payment.
3. Press Yes to confirm.

Note: When you delete a payment, the page doesn’t refresh automatically. You have to leave and come back to the Taxes menu; the payment shouldn’t appear anymore.

Conclusion

Thus, if you have been using QuickBooks for a long time and paid sales tax using a manual method then it’s time to record sales tax payment using the Sales Tax Center for new transactions that charge the new rates you set up. Recording sales tax payment in QuickBooks will help you to track your revenue and cash flow and update your sales and payment records.

Disclaimer: The information outlined above for “How to Record Sales Tax Payment in QuickBooks Desktop/Online” is applicable to all supported versions, including QuickBooks Desktop Pro, Premier, Accountant, and Enterprise. It is designed to work with operating systems such as Windows 7, 10, and 11, as well as macOS.