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nickcalibay
January 6, 2025
Question

parts with tax

  • January 6, 2025
  • 2 replies
  • 0 views

To all 

how can we do this? Please read the example.

I buy parts from another distributor, and because I am not registered with them as a contractor, I need to pay tax on the parts. Let's say part costs $15, and the tax paid is 1.42

Then, I installed this part for a customer, and I wanted to charge him $30 for the parts plus tax. 

 

So I need to charge the customer sales tax on only $15 profit not $30 and I fi need to add this in inventory how can we do it 

 

please advise 

2 replies

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Erika_K
January 6, 2025

Let's get this sorted out, nick. You can set up an inventory item to account for the parts. I'll share the details below.
 

You'll need to set the sales price to $30 while entering the cost as $15 for the inventory item and apply the appropriate sales tax (example. 1.42). This way, you can maintain accurate financial records and comply with tax regulations.

 

When recording the sales tax charged by your distributor, you have the option to categorize it either as an expense or as a liability, depending on your payment timeline. If you intend to pay the sales tax immediately, record it as an expense transaction.

 

However, if you plan to pay it later, you can record it as a liability. To do this, start by creating a liability account specifically for the sales tax. Once done, link it to a bill by selecting it as the affected account. Enter the Amount of sales tax you received from your distributor in this transaction. This method not only ensures accurate financial reporting but also allows you to effectively track your sales tax obligations over time.

 

Moreover, I'd recommend consulting an accounting professional for expert assistance with your sales tax calculations.

 

Additionally, I've included a list of resources you can refer to learn more about recording customer payments, processing refunds, and effectively managing your sales tax rate and settings in QBO:

 

 

I'm still available for any tax-related inquiries, drop them in the comments below. I'll be here to help you out.

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nickcalibayAuthor
January 6, 2025

Erika

I appreciate your response. I did most of everything on the inventory side. The only thing I am not following you here is the tax.

So, by creating a liability account for TAX, can I deduct the taxes I paid for the distributor from my sales tax payment?

Also, how will it affect my sales tax payment to the state in QuickBooks as I run the sales tax report?

Would you please advise 

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NicoleAscencionS
January 6, 2025

Thanks for coming back in the thread, Nick. I appreciate your effort in setting up the inventory item for the parts.

 

QuickBooks Online (QBO) is not designed to track sales tax automatically on non-sales transactions. You need to manually track sales tax on non-sales transactions like bills, checks, and purchase orders. 

 

The tax liability account is solely for recording and does not deduct taxes paid to distributors or affect state sales tax payments in reports.

 

Additionally, for expert guidance on sales tax calculations, I recommend consulting with an accounting professional or state agency.

 

Lastly, I've also provided a list of resources you can consult for more information on how to create or delete sales tax adjustments and manage your sales tax payments in QBO:

 

 

Accurate sales tax calculations are vital for businesses like yours. If you have any more questions, please don't hesitate to leave a comment. I'm always here to help you.

Rainflurry
Rainflurry
January 6, 2025

@nickcalibay 

 

"So I need to charge the customer sales tax on only $15 profit not $30 and I fi need to add this in inventory how can we do it"

 

Where did you get that from?  In all states I'm aware of, you need to charge sales tax on $30.  Get a sales tax resale exemption certificate from your state so you don't pay sales tax on your $15 purchase.  If you don't have a resale exemption certificate, then you pay sales tax on your $15 purchase and your customer pays the sales tax on their $30 purchase, thereby collecting $15 in unnecessary sales tax. 

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