Sales Tax Chapter 4

PAGE REF #CHAPTER 4: Sales Tax SLIDE # 2 2 Objectives Activate and Set Sales Tax Preferences Use Sales Tax Items on Sales Forms Set up Sales Tax Items Use Sales Tax Codes on Sales Forms Set up Sales Tax Codes Assign Sales Tax Codes to Items 99

PAGE REF #CHAPTER 4: Sales Tax SLIDE # 3 3 Objectives (Contd.) Assign Sales Tax Codes to Customers Use QuickBooks reports to assist in preparing your sales tax return Adjust Sales Tax Payable Pay Sales Tax Set up and use Sales Tax Groups Categorize Revenue by Sales Tax Code 99

PAGE REF #CHAPTER 4: Sales Tax SLIDE # 4 4 Activating Sales Tax and Setting Preferences You must set up your Sales Tax Preferences before using the Sales Tax feature in QuickBooks Select the Edit menu and then select Preferences Scroll to and select Sales Tax and then click the Company Preferences tab 100

PAGE REF #CHAPTER 4: Sales Tax SLIDE # 5 5 Using Sales Tax Items on Sales Forms The Sales Tax Item calculates the tax for the sale On sales forms, Sales Tax is calculated at the bottom of the form, separately from the rest of the Items on the form 103

PAGE REF #CHAPTER 4: Sales Tax SLIDE # 6 6 Setting Up Sales Tax Items Select the Lists menu and then select Item List To add a new Item, select the Item menu at the bottom of the Item list and then select New Select Sales Tax Item in the Type drop- down list and press TAB Enter the Tax Name, Description, Tax Rate, and Tax Agency 103

PAGE REF #CHAPTER 4: Sales Tax SLIDE # 7 7 Sales Tax Codes Sales Tax Codes are an additional classification for calculating and reporting sales tax A Sales Tax Code is assigned to each product or service item, as well as to each customer. Sales Tax Codes serve two purposes –First, Sales Tax Codes indicate whether a specific product or service is taxable or non-taxable –Second, Sales Tax Codes categorize revenue based on the reason you charged or didn’t charge sales tax. 105

PAGE REF #CHAPTER 4: Sales Tax SLIDE # 8 8 Using Sales Tax Codes on Sales Forms If you use a taxable Sales Tax Code in the Customer Tax Code field on sales forms, QuickBooks will charge sales tax If you use a non-taxable Sales Tax Code, QuickBooks will not charge sales tax unless you override the sales tax code (to a taxable code) on one of the lines in the body of the form When you set up a customer record, the Sales Tax Code you enter in the customer record becomes the default in the Customer Tax Code field on sales forms Similarly, when you set up Items, the Sales Tax Code you enter in the Item record becomes the default Tax Code in the body of sales forms 106

PAGE REF #CHAPTER 4: Sales Tax SLIDE # 9 9 Setting up Sales Tax Codes To set up a Sales Tax Code –From the Lists menu select Sales Tax Code List –Select New from the Sales Tax Code menu at the bottom of the list –Enter three character Sales Tax code and description –Each Sales Tax Code has a taxable or non- taxable status 106

PAGE REF #CHAPTER 4: Sales Tax SLIDE # Assigning Sales Tax Codes to Items When you set up Items, the Sales Tax Code you enter in the Item record becomes the default Tax Code in the body of sales forms To assign a default Sales Tax Code to an Item, follow these steps: –Select the Reports menu, select List, and then select Item Listing –Click Modify Report and remove all columns except Item, Description, Type, and Sales Tax Code –Double click items to edit the Sales Tax Code on each Item 107

PAGE REF #CHAPTER 4: Sales Tax SLIDE # Assigning Sales Tax Codes to Customers For a customer, the Sales Tax Code entered in the Additional Information tab becomes the default in the Customer Tax Code field on sales forms To assign Sales Tax Codes: –Select the Reports menu, then select List, and then select Customer Contact List –Click Modify Report, and select Sales Tax Code, Tax item, and Resale Num –Double click on the customer in the report to open the customer record to edit for Sales Tax Code 109

PAGE REF #CHAPTER 4: Sales Tax SLIDE # Calculating Sales Tax on Sales Forms QuickBooks automatically calculates and tracks sales tax on each sale, when you properly set up: –QuickBooks items –Customers –Sales Tax Codes –Preferences 111

PAGE REF #CHAPTER 4: Sales Tax SLIDE # The Sales Tax Liability Report The Sales Tax Liability report provides you with the information you need to prepare your sales tax return, including a breakdown of sales and sales tax collected by county and sales tax agency Select the Reports menu, then select Vendors & Payables, and then select Sales Tax Liability 112

PAGE REF #CHAPTER 4: Sales Tax SLIDE # Recording Discounts, Penalties, Interest and Rounding The amount of sales tax you owe on the sales tax return will often not match the amount accrued in QuickBooks due to several factors: –Some sales tax agencies require you to round sales tax to the nearest dollar when preparing the return –Many sales tax agencies offer discounts for timely filing –Many sales tax agencies charge interest and penalties for filing late –Some sales tax agencies require you to round sales tax to the nearest dollar when preparing the return Select the Vendors menu, then select Sales Tax, and then select Adjust Sales Tax 113

PAGE REF #CHAPTER 4: Sales Tax SLIDE # Paying Sales Tax After you prepare your sales tax return and make necessary adjustments for discounts, interest, penalties, or rounding, create a sales tax payment for the amount you owe When you pay your sales tax, don’t use the Write Checks window because the payment won’t affect the Sales Tax Items From the Vendor menu, select Sales Tax, and then select Pay Sales Tax 115

PAGE REF #CHAPTER 4: Sales Tax SLIDE # Sales Tax Groups In many states, multiple sales taxes must be collected and paid to separate agencies Sales Tax Group Items allow you to: –Combine multiple Sales Tax Items together so that each city, district, county, and state tax is tracked separately, while only the combined rate of all the Sales Tax Items shows on sales forms 117

PAGE REF #CHAPTER 4: Sales Tax SLIDE # Categorizing Revenue Based on Sales Tax Codes QuickBooks provides a breakdown of revenue by Sales Tax Code on the Sales Tax Revenue Summary report If your sales tax agency requires a detailed breakdown of tax exempt sales, use Sales Tax Codes to produce information you need To view each individual sale, double-click on any of the amounts in the Sales Tax Revenue Summary report: –This will display a Transaction Detail report showing each transaction affecting that Sales Tax Code 119

PAGE REF #CHAPTER 4: Sales Tax SLIDE # Chapter Review Activate and Set Sales Tax Preferences Use Sales Tax Items on Sales Forms Set up Sales Tax Items Use Sales Tax Codes on Sales Forms Set up Sales Tax Codes Assign Sales Tax Codes to Items 120

PAGE REF #CHAPTER 4: Sales Tax SLIDE # Chapter Review (Contd.) Assign Sales Tax Codes to Customers Use QuickBooks reports to assist in preparing your sales tax return Adjust Sales Tax Payable Pay Sales Tax Set up and use Sales Tax Groups Categorize Revenue by Sales Tax Code 120