Sales Tax and Underpaid Invoices

Glad to have you here in the Community, @rbprice.

I'll share some information on how sales tax work for underpaid invoices.

When you write off underpaid invoices, you'll just need to pay the tax on what was paid. However, to properly record this into your QuickBooks account, you'll have to create a Bad Debt (Service item) to reduce the unpaid portion of the sales. Here's how:

1. Go to the Lists menu and select Item List
2. Select the Item button and click New.
3. Choose Service Type.
4. In the Item Name/Number enter Bad Debt.
5. Put the Expense account then click OK.

Once done, you can create a Credit Memo to put the unpaid portion to the Expense account to record a negative sales tax. Please follow the steps below to create a credit memo:

1. Go to the Customers menu, then select Create Credit Memos/Refunds.
2. From the Customer: Job drop-down, select your customer.
3. Enter the items you're giving credit for.
4. Hit Save and Close.

I'll add this article for more details: Give your customer a credit or refund in QuickBooks Desktop for Windows.

Most importantly, I'd suggest seeking help from your accountant or tax experts to properly handle your sales tax records. They can review your transactions and make sure it's accurate.

Let me know how it goes by leaving a comment below, @rbprice. I want to make sure you're taken care of.

You may also be required to collect taxes for certain goods and services you offer. This article will help you keep an accurate record of these taxes so you can easily monitor and remit them to the appropriate tax collecting agency: Process sales tax adjustment.

Have a great day ahead!