Is My Sales Tax Report Correct?
Question: What steps should I take to review my sales tax report to make sure it's correct?
Answer: The correctness of your sales tax reports in QuickBooks is dependent upon your settings for customer sales tax and item taxability within your invoices.
A good habit is to review your invoices before sending them to your customers. Check the sales tax item and tax code (tax or non tax) to be correct, and what you are charging them, of course. Also, be sure that each line item is correctly coded as “tax” or “non tax”. For instance, in some states, freight is not subject to sales tax, so that line would be listed as non (tax). First, be sure invoices are correct before sending.
When submitting your sales tax filing, scan the sales tax liability report to spot any lines or numbers that look odd or out of place. For instance, if there is a number in the "Taxable Sales" column for tax exempt sales, there is a problem. Drill down on the numbers in the report to scan the customers in each category to assure they are coded correctly. QuickBooks is very forgiving and allows you to go back to the invoice to make the adjustments.
If you have collected sales tax in error, it must be returned to the customer or sent to the state. These funds belong to someone else.
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.