How to Set up Sales Tax in QuickBooks Desktop

QuickBooks enables businesses to track and remit sales tax to the relevant governing bodies. It is crucial to generate sales tax codes, items, and groups. Such settings assist QuickBooks in monitoring PST, GST, and HST, depending on the business location.

The rules of sales tax differ based on region or territory. Some provinces need PST and GST. However, other regions need just HST or GST. These taxes are accurately recorded by the QuickBooks application to track and deposit them to the right firm.

Knowing how to set up and implement sales tax is crucial for every business. Accurate setting up of sales tax helps businesses to:

• Streamline sales tax reports.
• Ensures invoicing is precise.
• Tax calculations are accurate.

This guide explains how to set up sales tax in QuickBooks Desktop successfully. Correct setup guarantees precise sales tax monitoring and regulatory compliance.

Key Factors to Remember Before Setting up Sales Tax

Prior to setting up sales tax in QuickBooks Desktop, consider certain key factors. Correct preparation ensures precise tax calculation, accurate reporting, and adherence to regulatory rules.

Here are the key factors to remember prior to setting up Sales Tax:

• Precise setup guarantees correct tax calculation and invoicing.
• Detect the right tax firm for depositing the accumulated sales tax.
• The right sales tax configuration makes sales tax report generation simple.
• Review sales tax regulations for all sales locations.
• Access the CRA website as a trustworthy source for the latest sales tax details.

Read Also: How to Reconcile in QuickBooks Desktop?

How to Set Up Sales Tax in QuickBooks Desktop?

Setting up sales tax guarantees accurate tax calculation, correct tax reporting, and invoicing. Here are the steps to set up sales tax properly in QuickBooks Desktop:

Step 1: Configure Sales Tax Settings

These steps initiate the sales tax and explain how QuickBooks implements tax to customers, items, and suppliers. Here are the steps to set up Sales Tax settings:

• Click the “Edit” option.
• Now, click the “Preferences” tab.
• Choose the “Sales Tax” option.
• Now, click the “Company Preferences” tab.
• Choose the “Yes” button to allow sales tax.
• In the “Customer and Supplier Tax Codes” segment, tick both boxes.

Note: Supplier or customer tax codes replace item-level tax codes.

Step 2: Set up a Sales Tax Agency

Sales tax firms symbolise government bodies where taxes are deposited. In QuickBooks, these sales tax agencies are registered as suppliers. Here are the steps to set up a Sales Tax agency:

• Click the “Supplier” menu.
• Now, choose the “Supplier Center” tab.
• Click the “New Supplier” option.
• Add the tax agency contacts like name and address.
• Add any remaining tax in the tab “Opening Balance.”
• Then fix the “As of” date.
• Click the “Sales Tax Settings” tab.
• Add a tick to the “Supplier is a Sales Tax Agency” tab.
• Add the “Business Number.”
• Choose the “Tax Return” type.
• Select the “Reporting Period.”
• Choose the date for “Period Ending”.
• Add a “Tax Label.”
• Select account for monitoring:
  • Track purchases separately
  • Track Sales separately
• Choose whether the tax firm charges tax on a taxed value.
• Choose whether to bill expenses with applicable tax.

Note: QuickBooks automatically adjusts tax balances as tax is collected.

Step 3: Create Sales Tax Item or Group

Sales tax items charge tax on entries and connect the tax to the right tax agency. The calculated amount is then added in QuickBooks in the concerned sales tax liability account. Here are the steps to set up a sales tax group/item:

1. Include a Sales Tax Rate and Item

To set up a new tax rate or generate a fixed tax amount, this option is used. Here are the steps to add a sales tax item and rate:

• Click the “Lists” menu.
• Now, choose the “Item List” option.
• Choose the “Item” option and then select the “New” option.
• From the “Type” tab, choose the “Sales Tax Item”.
• Add a “Sales Tax Name”. This new sales tax name will be displayed on the sales forms and invoices.
• For internal guidance, add an options description.
• Add the “Tax Rate/Amount”. For fixed tax, add a number, while for rate-based tax, add a percentage.
• Choose the “OK” button when a fixed-amount notification is displayed.
• From the drop-down, choose the right “Tax Agency”.
• Select the right “Sales Tax Return Line”. Alternatively, choose the options “Tax on Purchases” or “Tax on Sales”.
• To save the item, choose the “OK” button.
• Generate a “Sales Tax Code” for tax items calculated by percentage.

2. Create a Sales Tax Group Item

Sales tax groups implement several taxes together while monitoring every tax individually. Here are the steps set up a sales tax group item:

• Verify all the needed individual sales tax items are already available.
• Click the “Lists” option.
• Now, choose the “Item List” option.
• Choose the “Item” option and then select the tab for “New”.
• Choose the “Sales Tax Group” from the “Type” option.
• Add a Group Name.
• To print on the sales forms, add a “Description.”
• Choose the first line in the table and select the option “Sales Tax Item”.
• Continue the process until the setup includes all required tax items.
• To save the group, choose the “OK” button.

Note: Sales tax groups guarantee the precise calculation of multiple taxes. In addition, such groups ensure correct individual reporting to every tax agency.

Step 4: Allocate Sales Tax Codes

Depending on the business location, QuickBooks offers default sales tax codes. Such codes state whether a customer or item is fully taxable, tax exempted, or zero-rated. Right allocation guarantees precise calculation of tax processing, regulatory compliance, and reporting.

Here are the steps to assign sales tax codes:

1. Assign Sales Tax Codes to Items

Every service or product should display the tax status with the given sales tax code. The tax code is displayed beside the item on sales forms. The correct tax is implemented by QuickBooks automatically.

• Change the Tax Code of an Item
  • Head to the “Lists” option.
  • Now, choose the “Item List” option.
  • Click the item twice.
  • Choose the right “Tax Code.”
  • Now save the changes made.
• Include a Sales Tax Code Manually
  • Click the “Lists” option.
  • Now, choose the “Sales Tax Code List” option.
  • Choose the “Sales Tax Code” option.
  • Now, select the “New” button.
  • Add a small description and code.
  • Choose the option “Taxable or Non-taxable/Exempt.”
  • When tracking tax is cleared, choose the option “Sales Tax Item for Purchases.”
  • When tracking tax is accumulated, choose the option “Sales Tax Item for Sales.”
  • Choose the “OK” button.

2. Assign Sales Tax Codes to Customers

Item tax codes are replaced by customer tax codes. Here are the steps to allocate sales tax codes to customers:

• Customer Menu
  • Click the “Customer” option and choose the “Customer Center” tab.
  • Choose the option “New Customer.”
  • Click the “Sales Tax Settings” option.
  • Select the right tax code.
  • Save the changes.
• Sales Tax Menu
  • Click the “Sales Tax” option.
  • Now, choose the “Manage Sales Tax” tab.
  • Select the option “Assign Tax Codes”.
  • From the drop-down, select the option “Customers.”

How to Set up Sales Tax in QuickBooks Desktop for Mac?

Setting up sales tax in QuickBooks Desktop for Mac helps to monitor, calculate, and file taxes properly. A correct setup guarantees the right billing and seamless sales tax filing with the tax agency.

Here are the steps to set up sales tax in QuickBooks Desktop for Mac:

Step 1: Activate Sales Tax

• Navigate to QuickBooks and choose the option “Settings.”
• Choose the option “Sales Tax”.
• Choose the option “Customers are charged sales tax.”
• Choose how to make sales tax payment- Quarterly, Monthly, or Annually.
• Choose how sales tax accumulates:
  • For Accrual Basis- As of invoice date.
  • For Cash Basis- Upon receipt of payment.
• Navigate to the “Most common sales tax” option and choose the most accessed sales tax group/item.
• To indicate taxable items on printed receipts, choose the option “Mark taxable amounts with ‘T’ while printing.”

Step 2: Include Sales Tax Items

• Head to the “Lists” option.
• Now, choose the option “Items.”
• Choose “+” and select the option “New Item.”
• Choose the “Sales Tax Item” option from “Type.”
• Add the given details:
  • Description
  • Tax Name
  • Rate
  • Tax Agency
• Choose the “OK” button.

Step 3: Include Sales Tax Groups

• Head to the “Lists” option and then choose the option “Items.”
• Choose the “+” option and select the “New Item.”
• Choose the “Sales Tax Group” option from “Type.”
• Add the following:
  • Description
  • Group Number/Name
  • Tax Item
• Choose the “OK” button.

Conclusion

This guide provides comprehensive information on setting up sales tax in QuickBooks Desktop. Still, if there is any query or doubt, feel free to reach out to QuickBooks experts.

You can get in touch with our team of QuickBooks professionals. Our experts have the right expertise and knowledge to handle issues like this.

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