Skip to main content
J
joseph-desabrais
March 12, 2024
Question

Can I record a use (or sometimes referred to as "usage") tax in QuickBooks Online?

  • March 12, 2024
  • 1 reply
  • 0 views
I have products that were purchased without being charged a sales tax, and have been used by the business, rather than re-selling them. I need to be able to record the use (usage) tax due for such items that aren't re-sold.

1 reply

DivinaMercy_N
DivinaMercy_N
March 12, 2024

Hello there, Joseph. I'll share some steps to help you record the usage tax in QuickBooks Online (QBO). 

To start, you have to set up an out-of-state vendor in your account. 

  1. Select the +New menu and choose Add vendor.
  2. Click the New vendor button.
  3. Enter the name of the vendor and other details.
  4. Then, go to the Other box and enter Outstate.
  5. When done, select Save.


You have to use this vendor when you buy the items subject to usage tax for easy tracking.

Once finished, run the Transaction Detail by Account report for each use period. Here's how:

  1. Navigate to the Reports menu and type Transaction Detail by Account in the search bar.
  2. Next, click the Filter option and select Account. 
  3. In the Operation box, select equals, and in the Value dropdown select all the payment accounts you use.
  4. Then, click the + Add filter button and choose Vendor name. Select Equals in the Operation field and pick all your out-of-state vendors.
  5. When done, click Save.


After that, you have to multiply the report balance by the Use Tax percentage to find the total use tax owed to that vendor.

For additional information, you can read this article: Track Usage tax. Please know that this is for QuickBooks Desktop (QBDT) but the idea will still apply to QBO.

I also recommend, reaching out to your accountant for additional guidance in recording the usage tax. If you're not affiliated with one, you can go to our Find a ProAdvisor page to look for one near you.

 

You might also want to configure your sales taxes to make sure everything is accounted for accurately. Read this reference for guidance: Set up your sales tax in QuickBooks Online.

I'll be here ready to lend a hand if you have other concerns managing your item taxes. Please don't hesitate to leave a reply below. Have a good one and stay safe.

J
joseph-desabraisAuthor
March 13, 2024

Good morning, I have seen this answer posted before, but it doesn't work for what I am needing. I need it to show up on my Sales Tax Liability Report for the reporting period (each calendar month), as well as show up on my Balance Sheet for the monthly report.

 

As I said earlier, I was able to do it in the Desktop version of QuickBooks, but cannot seem to get it to post the same way in QuickBooks Online. I have contacted my tax advisor, and while they also use Quickbooks, they are unsure of how to correctly get it to post and show with the online version. We pay our Sales Tax and Use tax on one check to the state.

 

There has to be a way that this can be done without reinventing the wheel. From the digging that I have done, it appears that we are not the only business that is trying to figure this out with the online version. If someone could possibly help in figuring out a solution, it would be greatly appreciated not only by me, but apparently by a large group of others as well! Thank you!

M
MelroseV
March 13, 2024

Thank you for the prompt response, joseph.

 

The usage tax is exclusive to QuickBooks Desktop. As a workaround in QuickBooks Online, we can create a different tax rate for the usage tax.

 

Here are the next steps after creating the custom tax rate for the Use tax.

 

  1. Go to the Gear icon. Under Lists, select Products and Services.
  2. Click the New drop-down arrow to create a new product called Use Tax Income Offset using the same income account used when selling products.
  3. Under Sales tax, click Edit sales tax and the Nontaxable.
  4. Afterward, create a new expense account, Use Tax Expense in your Chart of Accounts if you don't already have one.
  5. Back in the Products and Services list, create a new product called Use Tax Expense that is not taxable using the Use Tax Expense account.
  6. Use a sales transaction (sales receipt or invoice) to record the products used and either use a "house" customer account or the actual customer that it is used for and change the tax rate to the Use Tax rate.
  7. Change the rate of the product from the sales price to the cost.
  8. Add the Use Tax Income Offset item and put the negative of the cost above.
  9. Add the Use Tax Expense item and put the negative of the tax amount below. 
  10. Once done, this will zero out the Sales Receipt. click Save and Close.

 

The Sales Tax Center and Sales Tax Liability report will now show the Use Tax amount due and will be included when you Record Tax Payment.

For future reference, you can read these articles to help you customize reports and save the customization: 

 

 

Should you need additional assistance in your reports in QuickBooks Online, feel free to include them in the comments below.

Terms & ConditionsAccessibility statement