Paying Sales Tax

Sales tax can be complicated, particularly in states where the number of tax authorities has exploded. You might have to pay sales taxes to several agencies, each with its own rules about when and how much. QuickBooks sales tax features can’t eliminate this drudgery, but they can help you pay the right tax authorities the right amounts at the right time—and that’s something to be thankful for. After

governmental paperwork, the chief aggravation of sales tax is that setting it up spans several areas of QuickBooks. If you’re new at collecting sales tax for your products, make sure you’ve completed the tasks in the following list so you’re collecting and tracking sales taxes properly. Only then can you pay the sales taxes you owe. Here’s the sales tax setup you have to do:

• Sales tax preferences. If you’re liable for sales tax, be sure to turn on Quick- Books’ sales tax feature, as described in the next section.

• Customer records. When you create a customer in the Customer:Job List, you can assign tax codes and tax items to the customer’s record. If you do, QuickBooks automatically calculates and applies the correct sales tax items to taxable sales on the customer’s invoices.

• Items. When you create items in your Item List, you can specify whether they’re taxable or not. That way, when you add these items to invoices or other sales forms, QuickBooks automatically applies the correct tax status. (When you add these to invoices, QuickBooks calculates the sales taxes you need to remit.)

• Invoices and other sales forms. QuickBooks calculates sales tax on invoices and other sales forms based on whether items are taxable and customers are tax exempt.   â•‰Paying Sales Tax

Sales Tax Payment Preferences

 To turn on QuickBooks’ sales tax features, choose Edit➝Preferences➝Sales Tax. Then, on the Company Preferences tab, in the Do You Charge Sales Tax? section, choose Yes. When you turn on this preference, QuickBooks automatically creates a liability account in your chart of accounts called Sales Tax Payable. (If the sales tax preference is turned off, QuickBooks creates this account for you the first time you add sales tax to an invoice after you turn on the sales tax preference.)

Note: The Manage Sales Tax window contains commands for all your sales tax tasks. To open it, on the Home page, click the Manage Sales Tax icon at the right end of the Vendors panel.

The preference settings you choose for paying sales taxes aren’t up to you. Tax agencies decide when your sales taxes are due, usually based on how much sales tax you collect. When you receive a notice about your required payment interval from the state or other tax authority, be sure to update your QuickBooks preferences to match. QuickBooks provides two sets of payment options to satisfy the tax agencies you’re beholden to:

• When do you owe sales tax? If your tax agency deems sales taxes due when you add them to customer invoices (known as accrual basis payment), choose the “As of invoice date” option. If your tax agency says sales taxes are due when your customers pay them (known as cash basis payment), choose the “Upon receipt of payment” option. When you generate sales tax reports (explained in the next section), QuickBooks uses these options to calculate the sales taxes that you have to remit.

• When do you pay sales tax? Tax agencies determine how frequently you have to remit sales taxes based on how much sales tax you collect. If your sales taxes are only a few dollars, you might pay only once a year. But if you collect thousands of dollars of sales tax, you can be sure that the tax agency wants its money more quickly, such as quarterly or monthly. When your tax agency informs you of your remittance frequency, choose Monthly, Quarterly, or Annually, as appropriate.

Tip: To help QuickBooks fill in tax-related fields for you, you can set preferences for the tax codes you use most often for taxable and nontaxable sales. If you sell predominantly in your own state, in the Preferences dialog box’s “Your most common sales tax item” drop-down list, choose the sales tax item or sales tax group for your state.

Producing Reports of the Sales Tax You Owe Tax agencies are renowned for their forms. You have to fill out forms to tell the agencies how much sales tax you’ve collected and how much you’re required to remit to   them. Fortunately, QuickBooks can take some of the sting out of your tax paperwork with reports that collate the sales tax info you need. Here are the reports you can generate:

• Sales Tax Liability. This report summarizes the sales taxes you’ve collected for each tax agency. To run it, in the Manage Sales Tax window, click Sales Tax Liability, or choose Reports➝Vendors & Payables➝Sales Tax Liability. Quick- Books automatically sets the dates of the report to match the payment interval preference you chose, as you can see in Figure 9-21.

• Sales Tax Revenue Summary. This report (Reports➝Vendors & Payables➝Sales Tax Revenue Summary) shows how much of your sales are taxable.

Figure 9-21:╇ If you remit sales taxes to several tax agencies, each with its own payment interval, you can rerun the report with a different interval to calculate the sales tax you owe to other agencies. In the Dates drop-down list, choose another interval, such as Last Calendar Quarter.

Remitting Sales Taxes You don’t have to enter a bill to pay sales taxes. QuickBooks not only keeps records of the sales taxes you owe, but also provides a dialog box especially for sales tax payments. Here’s how you keep the tax agencies off your back:

1. Choose Vendors➝Sales Tax➝Pay Sales Tax, or in the Manage Sales Tax window, click Pay Sales Tax. Either way, QuickBooks opens the Pay Sales Tax dialog box and fills in the amounts you owe for the last collection period (as defined in your Sales Tax preferences), as shown in Figure 9-22.

2. If you use more than one checking account, in the Pay From Account dropdown list, choose the account you want to use for payment. QuickBooks automatically selects an account here if you set the “Open the Pay Sales Tax form with _ account” preference.   chapter 9: paying for expenses ‰â•‰Paying Sal es Tax Figure 9-22:╇ If you remit sales taxes to only one tax agency or all your sales tax payments are on the same schedule, you can click Pay All Tax to select all the payments in the table. Chances are that you make payments on different schedules to different agencies—in which case, select all the agencies on the same schedule. You’lll have to repeat these steps for agencies that are on a different timetable.

Note: Make sure that the date in the “Show sales tax due through” box is the last day of the current sales tax reporting period. For example, if you pay sales taxes quarterly, choose a date like 6/30/2011.

3. In the Pay column, click cells to select the payments you want to make. QuickBooks adds a checkmark to indicate that a payment is selected, and adds the amount of the remittance in the Amt. Paid cell.

4. If you want to print the sales tax remittance checks from QuickBooks, turn on the “To be printed” checkbox. When you’re done, click OK. If you set up the checks to print in QuickBooks, you’ll see them the next time you choose File➝Print Forms➝Checks. If you didn’t turn on the “To be printed” checkbox, whip out your checkbook and write those remittance checks.