How is sales tax calculated?

QuickBooks calculates sales tax from the settings you enter in the Sales Tax Center. There, you first indicate whether all new products and services are taxable. Then, you add your sales tax rates and agencies.

Once you do that, QuickBooks adds a sales tax field to your sales forms, like invoices. Each time you create a new sales form, you choose the sales tax rate to use for the customer. (QuickBooks remembers the last rate used for each customer, but you can select a different rate from the list, if you have more than onesales tax rate.)

QuickBooks calculates the Taxable Subtotal by totaling every charge on the form that has its Tax column selected. Then, the Taxable Subtotal is multiplied by the Tax % to arrive at the figure in the tax amount field to its right. If you've added more than one tax rate in the Sales Tax Center, you can select a different tax rate from the Tax drop-down list.

Taxes on discounts can also affect sales tax.