How to Correctly Use Sales Tax
Liability in QuickBooks
Understanding and managing sales tax in QuickBooks is crucial for maintaining accurate financial records.
Whether you are dealing with the standard sales tax rates or need to make adjustments due to
discrepancies, QuickBooks provides the tools to handle these tasks efficiently. Here's a step-by-step guide
to ensure you effectively use sales tax liability in QuickBooks.
Following this guide will be helpful in setting up and managing the tax liability in QuickBooks. However, if
you find any difficulties while going through this guide, you must reach out to the experts by dialing +1
833-802-0002.
Steps to Verify and Setup your Sales Tax correctly
To ensure you don’t face any issues with sales tax liability, you should verify and set up the tax correctly.
Below, we have provided the suitable steps for the same; ensure to follow each one carefully:
Step 1: Verify Your Sales Tax Preferences
Firstly, check your sales tax preferences to ensure they align with how and when you collect sales tax:
• Navigate to the Edit menu at the top and select Preferences.
• Choose the Sales Tax category and go to the Company Preferences tab.
• Note the basis selected in the "When do you owe sales tax?" section. This could be on an accrual basis
(as of invoice date) or cash basis (upon receipt of payment).
Step 2: Set Up Sales Tax Correctly
Set up your sales tax items or groups appropriately. This ensures that QuickBooks calculates the correct
amount of sales tax for each transaction:
1.From the Lists menu, select Item List.
2.Use the Item drop-down menu to select New.
3.Choose either a Sales Tax Item or a Sales Tax Group, depending on your needs.
Step 3: Apply Sales Tax to Transactions
When creating invoices or receipts, apply the correct sales tax to ensure accurate tracking:
1.Add your customer and fill out the details of the sale.
2.QuickBooks will apply the default sales tax rate, but you can change this if necessary for the specific
transaction.
Step 4: Run Sales Tax Liability Reports
To review the sales tax you owe, generate a sales tax liability report:
1.Move to the Reports tab and then search for Sales Tax Liability Report.
2.Set the dates and accounting method to match how you've collected sales tax (either cash or accrual).
3.Click Run Report to view the sales tax you owe.
Step 5: Reconcile and Pay Sales Tax
When it's time to remit the collected sales tax:
1.From the Vendors menu, choose Sales Tax and then Pay Sales Tax.
2.Ensure the dates match the period you're remitting for and make the payment.
Troubleshooting Common Sales Tax Issues
If you find your QuickBooks sales tax liability report incorrect or does not match your expectations,
consider the following steps:
• Verify that sales tax rates are up-to-date and accurate.
• Check that the correct sales tax item or group is applied to each sale.
• Ensure
that
the
date
ranges
for
your
reports
are
correct.
For example, if the Sales Tax Liability Report ending date doesn't match the date in the Show sales
tax due field, it can cause confusion. To fix this:
• From the Reports menu > Vendors & Payables > Sales Tax Liability.
• Delete the From date and ensure the To date on the report matches the Show sales tax due through
the box on the Pay Sales Tax window.
Understanding the Sales Tax Liability Report
The Sales Tax Liability Report is a critical tool for understanding what you owe. Sometimes, you might notice
discrepancies; this could be due to transactions entered with incorrect dates or tax amounts. To address this,
QuickBooks allows you to create a sales tax adjustment for the correct reporting period. This way, you can ensure
your sales tax records remain consistent and accurate.
Conclusion
By following these steps, you can effectively use sales tax liability in QuickBooks and set it up correctly. If you
encounter issues where the sales tax figures seem off, remember to check the accounting method and date ranges,
which are common culprits. However, if you face such issues, you can reach out to us on +1 833-802-0002 and get
instant help.