Set up sales tax

1. Click Add/edit tax rates and agencies in the Related Tasks list.
2. Click New and select either a single tax rate or a combined rate.
3. Enter a name for the rate, the agency you pay the tax to, and the percentage for the rate. Use a single rate if you pay just one rate to a single agency.
4. Click Save. The new rate appears in the Sales Tax Rate and Agencies List. You'll see the new rate in forms like invoices and sales receipts.

You can edit a tax rate or tax name once you've added it.

If you're required to track sales tax for more than one tax agency, consider setting up a combined tax rate.

For example, you might need to report and pay out sales tax to your city, to your county, and to your state. With a combined tax rate, your customer sees only one sales tax rate on their sales form, but the Sales Tax Center keeps track and splits out the appropriate amounts for each agency. You can add up to 5 combined tax rates.

To add a combined tax rate:

1. Click Add/edit tax rates and agencies in the Related Tasks list to the right.
2. Click New and select Combined tax rate.
3. Enter a name for the combined rate.
4. Add the different sales tax components that make up the combined rate: component names, agencies, and percentages. You can add additional components if needed.
5. Click Save.

The new rate appears in the Sales Tax Rate and Agencies list. You can also now select the new combined rate in forms like invoices.

You can view the amounts owed to each agency in the Sales Tax Owed list in the Sales Tax Center. Or you can view the Sales Tax Liability report.

1. Click Rename next to the agency name you want to edit.
2. Make the changes you want to the tax name and click Save.

Note: You can't make changes to the Tax Rate field. If the rate needs to change, deactivate the existing tax name and rate, and then create a new tax with the rate you want.

You can edit a sales tax rate if you need to make changes to it. You can only edit component rates. To edit a combined rate, make changes to its component rates.

To edit a tax rate:

1. In the navigation bar, click Sales Tax (or Taxes > Sales Tax depending on what you see).
2. Click Add/edit tax rates and agencies in the Related Tasks to the right.
3. In the Sales Tax Rates and Agencies table, select the rate you want to change and click Edit.
4. In the Edit Sales Tax Component window, change the rate. You can also change the component name if you like.
5. Click Save.

QuickBooks returns to the Sales Tax Rates and Agencies table and highlights the component rate you changed.

What happens when you edit a sales tax rate?

• The new rate is available for new transactions only.
• If you create a new transaction but use dates in the past, the transaction uses the new rate.
• Once you edit a rate, the earlier rate can no longer be used.
• Existing transactions that used the earlier rate remain unchanged unless you edit the transaction and specifically select a different sales tax rate.
• For recurring templates that use the changed component, new transactions created with the template use the new rate. Existing transactions created with the template and the earlier rate remain unchanged.
• Reports show the data for both rates (before and after) if there are transactions for both the rates in a particular period.

To select or change the start of the tax year:

1. Under Sales Tax Owed, select the appropriate month from the Start of Year drop-down.

This selection may be modified, if necessary.

To select or change the accounting method:

1. Under Sales Tax Owed, select either Cash or Accrual from the Accounting Basis drop-down menu. Which accounting method should I use?

This selection can be modified, if necessary.

You can turn sales tax on or off by editing sales tax settings.

To edit sales tax settings:

1. Click Edit sales tax settings in the Related Tasks list to the right.
2. Select Yes if you charge sales tax.
3. (Optional) Set the following options:
• Set a default tax rate. (The default rate is automatically selected in new sales forms. You can choose a different rate if needed. If you choose a different rate for a particular customer, QuickBooks remembers the rate for that customer and overrides the default rate.)
• Select whether all new customers are taxable. (This means new customers you add aren't tax-exempt. You can change this setting for individual customers in the Tax Info section of each customer record.)
• Select whether all new products and services are taxable. (This means items you add to a form have the Tax column already selected. You can clear individual items in a form if you don't need to charge sales tax.)
4. Select No if you don't charge sales tax. If you already charged sales tax on earlier transactions, you won't be able to disable sales tax without first removing sales tax from those earlier transactions.
5. Click Save when you're done.