How to Record Sales Taxes in QuickBooks Online

A Step-by-Step Guide to Managing Sales Taxes in QuickBooks Online

This step-by-step guide will walk you through recording and managing sales taxes in QuickBooks Online, including setting up sales tax settings, reviewing liability reports, filing taxes, and recording payments.

1. Access the Sales Tax Portal

Navigate to the Taxes section in QuickBooks Online from the left-hand menu.
Select Sales Taxes to open the Sales Tax Portal. Here, you'll see all the jurisdictions where you've collected sales taxes.

2. Verify Your State’s Tax Basis (Optional)

ℹ️ This step is only necessary the first time you run your sales tax report in QuickBooks.

Determine whether your state uses accrual or cash basis for sales tax.
- Accrual basis: Taxes are due when invoices are created, regardless of payment status.
- Cash basis: Taxes are due only when invoices are paid.
To confirm your state’s basis, search online for: "[State name] sales tax accrual or cash basis."
- Example: Florida uses an accrual basis, while North Carolina uses a cash basis.
Ensure that QuickBooks matches your state’s filing method.

3. Update Sales Tax Settings

ℹ️ This step is only necessary the first time you run your sales tax report in QuickBooks or if your sales tax filing frequency changes.

If changes are needed, click Sales Tax Settings in the Sales Tax Portal.
Select Edit to:
- Update your filing frequency (e.g., quarterly to monthly).
- Change the reporting method (accrual or cash basis).
- Mark a tax jurisdiction as inactive if no longer needed.

4. Review Sales Tax Liability

Navigate back to the Sales Tax Portal.
Select the period you want to review, e.g., January 2024 - March 2024.
Click Review Sales Tax > View Liability Report to:
- See the taxes due for the period.
- View breakdowns by county or jurisdiction (if applicable).

⚠️ To ensure accuracy, cross-reference this report with data from third-party invoicing software (e.g., Square or design software like MyDoma).

5. File Sales Taxes

Using the liability report, file your sales taxes outside of QuickBooks via your state’s tax portal.
Note any adjustments (e.g., rounding differences or credits) during filing.

6. Record Adjustments in QuickBooks

If the actual amount paid differs from the liability report, record an adjustment in QuickBooks:
1. Navigate to the relevant tax period in the Sales Tax Portal.
2. Click Make Adjustment and provide the reason (e.g., rounding error, state credit).
3. Set the Adjustment Date to the last day of the filing period.
4. Choose an account (e.g., "Sales Tax Adjustments") and enter the adjustment amount.
5. Click Save.

7. Record Sales Tax Payment

Once the adjustment is saved, proceed to record the payment:
1. In the Sales Tax Portal, click Record Payment.
2. Enter the amount paid, the payment date, and the bank account used.
3. Click Save Payment.
QuickBooks will update the portal to reflect the payment status with a green checkmark.

8. Verify Payment Status

Confirm that the tax period shows as Paid in the Sales Tax Portal.
This ensures QuickBooks reflects the correct payment status for your records.

9. Tips and Best Practices

Always verify tax basis and filing frequency with state authorities to ensure compliance.
Regularly cross-check QuickBooks reports with third-party software to avoid discrepancies.
Record adjustments promptly to ensure accurate reporting.

If you have any questions or need any more help, please don't hesitate to contact our support team.