Tracking sales tax in QuickBooks can be made very easy or more difficult, depending on your needs.
- Very Easy Method – The relatively simple sales tax tracking in QuickBooks is best for those who do not invoice their clients directly from the QuickBooks software. For example, let’s say you are a retailer with an in-house Point of Sale system or an online e-Commerce system. You would charge and collect sales tax via those two front-end financial systems but the data that gets integrated into QuickBooks (the back-end software) is directly to some sort of “Sales Tax Payables” account. Then, each month or each quarter, when you go online to file and pay your sales tax obligations, you would just grab your sales/revenue data to report this, then book the sales tax payment directly to that same “Sales Tax Payables” liability account (to reduce your liability here).
- More Difficult Method – The more difficult (but more accurate) sales tax tracking in QuickBooks is appropriate for businesses that use QuickBooks to send invoices or sales receipts directly to their customers. Incorporating this method requires that you activate your sales tax module in QuickBooks, set up a sales tax vendor profile, and set up all of the individual sales tax rates you will be charging to your customers. This way QuickBooks can automatically calculate and maintain all of your sales tax liabilities and even process an actual sales tax liability report for you, so you know exactly what revenues might get reported and what your liabilities should be to the sales tax agencies.
Above everything mentioned above, ALWAYS check your state’s sales tax laws first to ensure you are reporting the correct revenues to any corresponding tax agency.
Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.