Question

Why does QBO add sales tax to tax exempt customers?

Forum|Forum|5 years ago
October 21, 2020
7 replies
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Original commenter did not share additional details

QuickBooks Online

it should not, but I have heard of it happening. Be sure to set the customer record to non tax, and select that for each item too, that will prevent what appears to be a bug

D

dancmatthewsAuthor

Yup, that's what I'm doing now. As my business grows it gets tricky to remember which customers are taxable and which are not. It's becoming a problem. And I'm wondering how that's manifesting itself in the sales tax report, especially as it related to prepaid taxes that are refundable that must be taken into account in the sales taxes due for the monthly or quarterly payment.

S

ShiellaGraceA

Thanks for coming back to us, @dancmatthews.

I have some information about the incorrect data on your sales tax report. Aside from making your customer profile exempy, you'll also have to set your products and services as non-taxable in their category, and mark the Tax column when creating an invoice. This way, your sales tax liability report will have the right info.

To set up a nontaxable category items:

Go to the Gear icon at the top.
Select Products and services.
Edit the item in question and make sure that the Sales tax category drop-down is Nontaxable.
Click Save.

After changing the sales tax category, mark the Tax column on invoices. See the attached images below for your reference.

If you've already verified the above mentioned and you're still getting the same result, please contact our QuickBooks Customer Care Support so we can investigate further and create a case for you.

Here's how to reach out:

Go to the Help icon.
Click Contact Us.
Type in your concern in the dialogue box. Hit Let's talk.
You can either choose Start messaging or Get a Callback to get a representative.
Snap the Confirm my call button.

In case you need help with other tax tasks, click this link to go to our general tax topics with articles.

Let me know if you still have questions or concerns. I'll be around to assist you every step of the way. Take care and have a good one.

W

WestfieldAV_Com

March of 22... Problem persists.. following to see if it ever gets sorted out.... :(

Westfield AV

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spytekbookkeeping

I have the same issue with sales tax EXCEPT I never use the app bc it's crap. I am online only on a PC. I am a bookkeeping firm and produce invoices from several different companies who sell wholesale AND retail. I am consistently receiving emails regarding invoices being sent with sales tax added but the customer is non-taxable AND the "this customer is taxable" box is NOT checked. This has happened for years with no fix whatsoever. WHAT. IS. THE. DEAL. QUICKBOOKS ONLINE???

Super unprofessional.

03.25.22

D

DebSheenD

This isn't the kind of service we want you to experience in the sales tax feature, spytekbookkeeping.

I understand the impact of this behavior on your transactions. Ensure to uncheck the tax column when creating transactions.

In the meantime, I encourage you to contact our QuickBooks Online Support Team so they can further investigate your concern and have an immediate fix.

Here's how you can contact live support:

Sign in to your QuickBooks Online company.
Select Help (question mark icon) at the top right.
Select Contact us to connect with a live support agent.

Additionally, I've included you'll want to check these articles to learn more about sales tax:

I'm only a few clicks away if you need assistance with your other QuickBooks tasks. It's always my pleasure to help you out again.

F

Franchise Software

We recently had one of our offices report an issue with tax being charged on tax exempt customers. In troubleshooting we determined that in this case at least the cause seems to be the tax exempt reason the customer has selected. One customer set as exempt was set as "Religious Organization" and when we changed it to "Resale" QBO stopped applying sales tax. We used the same items on both invoices.

This seems like a pretty major bug with QBO and it's disappointing to see replies in this thread dating back over two years and no true solution being offered. We hope to see this resolved in the near future.

Qlil

Is there a general consensus to this tax mess? Provided there are no current bugs or hiccups in the QBO sales tax platform... can someone please verify if this procedure I'm using for sales tax is correct ?

I understand all customers need to be classified as taxable (for customers being charged sales tax) or NOT taxed (for customers exempt from being charged sales tax).

My company is in Ohio.

SHIP TO AN OHIO ADDRESS: On an item that is taxable first, the customer needs to be classified as taxed. Then, invoice needs to show a check mark on the tax box indicating the need to charge sales tax on that item. Third, at the bottom the tax rate should be "based on location" correct?

SHIP TO OUT of STATE ADDRESS: Same example but my taxable item is going to be sold out of state. First, classify customer as exempt/not taxable. Then, on the invoice the tax box needs to be blank (no check mark) bc sale is out of state. Third, at the bottom the tax rate should be "based on location" since the shipping address is out of state, correct? Or should I select the sales tax rate as "non taxable sales" since the sale is not taxable out of Ohio?

Also, I agree that having two sets of items (one taxable and one non taxable) is ridiculous and hope that is not the answer to the sales tax hiccups.

Thanks for the help!

M

Mark_R

Thank you for posting your query here in the Community, @Qlil.

I've come to share information about how QuickBooks calculates sales taxes.

QuickBooks automatically calculates the total tax rate for each sale based on your customer's tax-exempt status, where you sell, where you ship, and what you sell.

Based on your example of shipping an item to an Ohio address, it's correct. Please know that states require sellers to charge tax based on business location, even when you sell or ship to a different address in your state. QuickBooks knows the tax rules, wherever you run your business.

On the other hand, you just need to remove the checkmark from the Tax box when selling items out of your state address. By doing this, QuickBooks won't calculate sales taxes even without selecting the sales tax rate as non-taxable.

Also, you'll want to know that you don't need to charge taxes for out-of-state transactions unless you have an economic nexus in another state. In case you charge tax rates outside your state, we recommend seeking help from your accountant since it's a little complicated.

I'm adding this article to learn more about how QuickBooks calculates sales tax: How QuickBooks Online calculates sales tax.

Come back to this post if you need clarification about this, @Qlil. I'll be around to provide further assistance.

When it's time to file your sales tax return and record your tax payment, you can check out this article for the detailed steps and information: File your sales tax return and record sales tax payments in QuickBooks Online.

Have a good one.

Qlil

Thank you Mark_R for your reply.

In order to make sure sales taxes are calculated correctly do all customers need to be set up as taxable (for customers being charged sales tax) or NOT taxed (for customers exempt from being charged sales tax)? Is this info required in making sure sales taxes are calculated correctly?

When we sell light bulb A101 from our product list, it is considered a taxable item. When sold in Ohio we charge sales tax. When sold & shipped to someone in Kansas we do not charge sales tax. Should it be set up in our product/item list twice? (see examples)

Example 1: Light Bulb A101 (taxable) bc this product is a taxable item

Example 2: Light Bulb A101 (taxable) for invoices in Ohio

Light Bulb A101 (nontaxable) for invoices out of state

On an invoice to Kansas does light bulb A101 need to be set up in our items as a nontaxable to calculate sales tax correctly on an invoice?

Or can we just have item light bulb A101 in our items (set up as taxable) and on the invoice leave the tax box blank - not checked?

Again thank you for the help.

S

SheffieldC916

Looks like Intuit Quickbooks has still not addressed nor given an answer to this apparent bug.

Our question is simple when marking a customer as non tax, why are they still being charged tax on the invoice?

It adds in the tax line when normally the sales tax line is blank. On top of that when you erase it and save, thinking you have fixed it, it saves it with the tax. We should not have to do manual fixes(work arounds) for a product that we are paying astronomical rates for. We have been using QBO for over 10 years and have to do work arounds for several things. Now we are looking for different software but everything seems to be overpriced by incorporating features not needed for everyone.

A

AbegailS_

Hi there, SheffieldC916. I understand the impact of this behavior on your transactions. I'm joining this thread so I can share more details about this issue.

If a customer is listed as tax exempt and has a valid address, the tax exempt status won't apply to any invoices or sales receipts created for them. That being said, let me route you to the best available support so we can further investigate its root cause.

Here's how to reach out:

Go to the Help icon.
Click Contact Us.
Type in your concern in the dialogue box. Hit Let's talk.
You can either choose Start messaging or Get a Callback to get a representative.
Snap the Confirm my call button.

For more details on managing your sales tax and how we calculate it, you can check out the Set up and use automated sales tax in QuickBooks Online article. For your future references, you can also use custom rates to manually calculate taxes on invoices or receipts.

When it's time to file your sales tax return and record your tax payment, you can check out this article for the detailed steps and information: File your sales tax return and record sales tax payments in QuickBooks Online.

I'm only a few clicks away if you need assistance with your other QuickBooks tasks. It's always my pleasure to help you out again.

L

LNLBackflow

Your solutions do not work. We always use the correct buttons when setting up customers. Even when we choose to unclick the "customer is taxable" button, tax still appears on invoices. Please stop using the textbook answers in your replies to customers' concerns. It just makes it worse. This is an issue. Please fix it.

J

Jska

I have the same issue however it’s primarily when using iOS apps. I have noticed also that when entering a new client there’s no option that allows to make a client tax exempt in the iOS apps. For the amount of money paid for QBO Advanced, there’s no reason features should be limited when using the app whether it’s iPhone or iPad. The app is way too basic for the monthly cost.

L

LeizylM

Making a client tax-exempt in the IOS would be incredibly valuable, Jska. I understand the significance of having such a feature.

There isn't a specific feature for making a client tax-exempt in the IOS apps. I suggest sending feedback to our Product Development team for evaluation. Your valuable insights will have an opportunity to be considered and reviewed

Here's how to submit feedback:

Go to the Gear menu and then select Feedback.
Type in your feature request in the description box.
Once done, click on Next.

Furthermore, you can check out this article that contains a comparison chart to give you more details about the available features in the QBO mobile app: Compare mobile app features.

This thread is still open if you need a hand with managing the sales tax feature. Just add the details in the comment section and I'll get back to give answers. I'm looking forward to assisting you again!

9

99duckey

So it appears this will be almost 3 years worth of a problem, and there is still a tax issue. I will try to give an abbreviated version of my experience(s):

Problem: I will give 3 scenarios

Scenario 1: QBO appears to work as intended working from a desktop. Small sample size

Scenario 2: Integration with OneSaas eBay app. 100% success large sample size

Scenario 3: Integration with OneSaas Amazon app. 100% failure rate large sample size

Scenario 2 & 3 are setup the same way where it counts. The customers are tax-exempt and the apps are set to "You have Automatic Taxes turned on in QuickBooks Online. There is no need to configure any tax mappings."

I have had nothing but great success with the @OneSaas group. From my understanding, they are a part of Quickbooks, but they are segmented and can offer little to no help once the problem has to do with the main QBO platform. I tend to put more faith in them as I will mention again how professional they have been each time I've dealt with them.

In both scenario 2 & 3, the app is sending data to QBO. OneSaas states that at that point, the data becomes QBO's. In scenario 3, QBO calculates and includes sales tax for an exempt customer. Let me remind you (hopefully QBO engineers reading this) that the app is set for QBO to handle taxes. So I ask again, why are taxes being added to the invoice? It works for one customer and not the other.

QBO Customer Service: I think I once got in touch with a representative that was truly helpful. All other times, a claim is filed, time passes either in hopes the customer forgets about the problem, or you get a generic reply (similar to the below) instead of a human reaching out to fully understand the situation. The email reply I received:

"Thank you for requesting updates on Tax-Exempt Customers have sales tax calculated. Our engineers have determined this is working as designed. We appreciate your understanding and encourage you to share your concerns or ideas via the in-product Feedback tool.

To access the Feedback tool, click on the Gear Icon in the upper right hand corner of the Dashboard screen and click on Feedback.

There will be no further updates on this investigation.

This is in reference to support contact Case Number ###########"

So the highlight here is "OUR ENGINEERS HAVE DETERMINED THIS IS WORKING AS DESIGNED" & "THERE WILL BE NO FURTHER UPDATE". This seems unacceptable given QBO has a customer with a technical issue.

9

99duckey

The problem still persists.

G

GenmarieM

We want to resolve this as much as you do, @99duckey.

I understand the importance of being able to calculate your sales taxes with ease.

Upon checking here on my end, the investigation concerning QuickBooks calculating sales tax for tax-exempt customers is still in progress. Rest assured, our engineers are aware of this and they’re doing their best to find a solution to fix it.

Thus, I encourage you to contact our Phone support team. They can add you to our notification list and you'll be notified via email once the update is available.

You might also want to check out this article to guide you in managing sales tax payments in QBO: Manage sales tax payments in QuickBooks Online

We appreciate your patience while waiting for this concern to be resolve. Feel free to post here if you have any questions about sales tax or any QuickBooks-related concerns.

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