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scott40
February 21, 2025
Question

new Sales tax feature - reporting.

  • February 21, 2025
  • 2 replies
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I just saw that there's a new feature where QBO allows sales tax to be calculated. Great - however, I don't report sales tax and here's why.

I pay sales tax on widget A. When I charge the client I take the original price + tax and mark it up 20%. However that 20% is being taxed as income for the business. 

 

Now - when I buy something since the taxes isn't listed out per each item, I manually calculate the tax for each widget on the receipt.  So widget + tax and sometimes I do that 20-30 times per receipt. QBO already does the markup of the 20% when I mark it billable. 


Since I'm not collecting 'sales tax' I just want to use the feature to automatically calculate the tax per widget I originally paid. Is this possible to use this feature without the system producing sales/use tax that it expects me to file with the State? If yes, the new feature won't work for me and I'll be left with my calculator standing out in the cold.

    2 replies

    FishingForAnswers
    FishingForAnswers
    February 21, 2025

    @scott40  It seems unlikely that they'll untether the sales tax system from a feature that calculates sales tax.

     

    That being said, you could probably get by just as well with a simple Excel sheet for those calculations. Still be a bit of transcribing over to QBO, but Excel formulae can be very handy, especially if you still have one of the old versions installed.

    M
    Mark_AG
    February 21, 2025

    Hi there, Scott.

     

    Using the sales tax feature is only intended for collecting and remitting sales tax to the state. However, you can manually track through Excel or using a third-party app. Let me share more information.

     

    The sales tax feature isn't directly intended for calculating the tax you paid on your purchases, especially when you're trying to separate the original cost of goods from the tax you paid on them. It's not designed to break down the tax included in your purchase receipts.

     

    Here's why the current sales tax feature isn't compatible for your needs and what alternatives you can consider:

     

    • Focus on Output Tax: QBO's sales tax mainly calculates the output tax you charge for your customers. It's not meant to calculate the input tax you paid on your purchases.
    • Tax Agencies: The sales tax feature is linked to tax agencies and reporting requirements. Even if you could somehow use it to calculate input tax, it will generate reports that you don't need and can cause confusion.
    • No Itemized Purchase Tax Breakdown: QBO's sales tax feature relies on you setting up tax rates and applying them to sales transactions. It doesn't have a mechanism for automatically calculating the tax included within the cost of goods you purchase, especially when the tax isn't itemized on the receipt.

     

    Alternatively, you can utilize tracking your input taxes using Excel. You can create a spreadsheet to track your purchases. In the spreadsheet, you can have columns for the item name, quantity, price per item, tax per item (calculated manually), and total cost. This will allow you to keep a detailed record of the tax you paid on each item. You can also use a third-party app that has this feature to achieve your desired outcome.

     

    After that, feel free to visit these articles for your future reference:

     

     

    Please don't hesitate to ask if you have additional concerns besides using sales tax in QBO. We're always here to ensure your business needs are met.

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