Is My Sales Tax Report Correct?
Question: Is there a way to know if my sales tax report is correct?
Answer: I always suggest reviewing the information on your sales tax report before filing. The report is only as correct as the data you enter into QuickBooks.
To begin, are you up to date with your bank and credit card reconciliations? If so, then you can be assured that all cash inflows and outflows have been recorded in QuickBooks. This will not tell you if the transactions have been entered into the correct accounts, but you will know that all cash movement has been recorded. If not, make sure to complete your reconciliations before running the sales tax report.
Next, look at the report. Drill down on the totals for non-taxable and taxable sales on each line in the report. “Drill down” means to hover the cursor over a number until you see an image that looks like a magnifying glass. Double click to see the data that comprise the totals. Look at each invoice accounted for in this drilldown. Is the information on the correct line? Is the sales tax item assigned to this invoice correct for the customer? If not, adjust it.
Are the totals in the “Tax Collected” column and the “Sales Tax Payable” column equal? If not, there is likely a problem. Go back to the month previous and see if the columns are equal there. Go back until you find the month with equal Tax Collected and Sales Tax Payable totals. This is likely where the problem occurred. More often than not, this indicates that data has been changed in an earlier period causing an imbalance between the amount collected and the tax owed. If you have printed out previous months reports plus the drill down reports showing the taxable and non-taxable invoices included in each period (as you should), you can go back and find what has changed. Typically, it is a matter of dates being entered incorrectly in an earlier period.
Finally, once all is correct, print the report and the drilldown of taxable and non-taxable sales to file away in case there is a problem down the road.
Now you are ready to file your sales taxes electronically with your state(s) with the data on your Sales Tax Liability Report.
Please email accounting questions you would like considered for the column to HGatter@AccountingSupportLLC.com with the subject line of "Ask the Accountant."
Harriet Gatter, owner of Accounting Support LLC, was an ad specialty distributor for 23 years and an adjunct professor of accounting at Neumann University. She sold her ad specialty business in 2012, became certified as a QuickBooks ProAdvisor, and now works exclusively with ad specialty distributors nationwide on their QuickBooks, order management and accounting needs.