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reflectionsigns
October 11, 2022
Question

Sales Taxes incorrect in QuickBooks Online

  • October 11, 2022
  • 3 replies
  • 0 views

I'm in Colorado and I've been audited. Through this process, I realized that the sales taxes prefilled in QBO are incorrect. I am in the process of turning off sales taxes or at least setting up my own sales tax jurisdictions to override the sales tax shown on the invoices. I can add a Custom Rate, but QBO does not allow you to CREATE an Agency. This is where the trouble begins. There are multiple cities in Colorado that have different counties with different tax rates, so if you just choose the city, it is a one size fits all rate, so it is not calculating the correct amounts in the reports. There are also special taxing districts. So, there is no "Agency" that accurately shows the tax that should be collected for every taxing jurisdiction. I have contacted QBO multiple times and all the reps can do is "GOOGLE" sales taxes and find a general answer. I have started a spreadsheet to enter all of the tax information to use for tax reporting. How have others dealt with this? 

    3 replies

    A
    AbegailS_
    October 12, 2022

    I'm here to share some information on how to fix incorrect sales tax in QuickBooks, @reflectionsigns.

     

    QuickBooks Online automatically calculates the total sales tax rate base on your customer's sales tax-exempt status, the location where you sell/where you ship, and your service or product's sales tax category. The total sales tax rates are the sum of state rates and local rates, including the city, county, and/or district rates.

     

    We can create a sales tax adjustment to record credit to match the sales tax payment. To do this,  you'll need to create an account for the adjustment. 

     

    You can set up an income account if you want to decrease the amount due, or an expense account if you need to increase the sales tax due. I'd also suggest consulting an accountant in order to choose the appropriate account and detail types. 

     

    Once verified, you can follow these steps below:

     

    1. Go to the Gear ⚙️ icon, then Chart of accounts.
    2. Click on New.
    3. Choose Income or Expense from the Account Type drop-down.
    4. Select the account's Detail Type.
    5. Name you adjustment account.
    6. Click on Save and Close.

     

    After that, go to the Sales Tax tab to add an adjustment. Here's how:

     

    1. Go to Taxes from the left menu, then Sales Tax tab.
    2. Locate the tax period you need to adjust and hit View return.
    3. Tap Add an adjustment.
    4. Select the Reason for the adjustment.
    5. Choose the Account for adjusting sales tax.
    6. Enter the adjustment amount.
    7. Click Add.

     

    Here's an article for the detailed instructions: Create or delete a sales tax adjustment in QuickBooks Online.

     

     

    I'm also adding this link in case you need help managing sales tax. It contains topics with articles to guide you along: Manage taxes in QuickBooks.

     

    Please let me know if you have other questions or concerns with taxes. I'll be around to help. Take care and have a good one.

      R
      reflectionsignsAuthor
      October 12, 2022

      Thank you for the information. Yes, we are aware of how to make the corrections. So, by your reply, I am assuming there is no way to create a new agency. Is that correct? The sales tax feature in QBO is horrible for companies who are in Nexus states.

        J
        jamespaul
        October 12, 2022

        Hello, reflectionsigns.

         

        I can see the benefit of having a flexible option to create districts and counties for nexus state. Tax audits are something we definitely want to avoid, so I'd like to elaborate more on the current Sales Tax feature, and throw in a workaround. 

         

        As you pointed out before, we can create another agency for a certain city with a specific tax rate in Colorado. However, we're unable to specify a certain district or county with different rates. 

         

        Aside from what my colleague mentioned, we can also override the tax amounts in an invoice or sales receipt to ensure we get the correct amounts. Here's how to do it: 

         

        1. After adding the invoice details, scroll down then click the See the math link (under the Select tax rate portion). 
        2. Under Products and services click Edit.
        3. Enter the correct rate or the amount.
        4. Set a reason, then click Confirm.
        5. Hit Close. 

         

        Also, we can send feedback to our developers to have a flexible option to include the special taxing districts and counties for nexus states. They'll review your inputs and consider them in future improvements for QuickBooks Online.

         

        To send feedback, click on the Gear icon then select Feedback. 

         

        After processing your sales with the correct tax rates, do you need help filing your sales taxes in the future? Or do you need to check on your nexus states using the Economic Nexus reports feature? I'll include a couple of articles that'll guide you with the steps and details: 

         

         

        I'm all ears if you have other concerns regarding your sales taxes. If you have questions about your entries, other reports, or data, let me know and I'll help you out again. 

        S
        Saoirsegirl
        December 6, 2022

        Hello Friends - Here is an update.

        I did find out how to add in the Home Rule Cities to add them into the calculation on the invoice.  You use the same sales tax settings area and use the "Add agency" button to add each that are needed. You can create the invoice, and if the city is not in your settings already, you can add it in, open the invoice and update the sales tax calculation before the invoice is sent - a bit of a hassle going back and forth, but better than entering all proactively.  Also recommended not ad-hoc update/overwrite the calculation in the invoice like the "old days" - let the settings take care of it for you.

         

        Now the best news - I finally found a home-rule Sales tax agent (down in the Springs) who informed me that one of the features of Home-rule cities, especially those who are participating in the SUTS program with the state, is that they are observing "Economic Nexus". So even if you are a Colorado business, until you hit 100k in Colorado sales, you ONLY pay the State, County* and Special Districts that are in SUTS. The rest of the "Sales Taxes" due revert to being "Use Taxes" that are the obligation of the buyer/user and they report them as part of their Income Tax filing at the end of the year.

         

        Of course, this lines up with the default in QBO - maybe they have a little bit going for them :-). When you hit 100k, then add the cities that your history says are material and you should be in much better shape and/or it is time for a more powerful Sales tax integration that implements the deeper levels of jurisidiction and tracks more complex nexus tracking.

         

        PLEASE NOTE:

        1) This is a basic overview, I am not an expert, and there are many sizable Home-rule cities and counties that are NOT yet part of SUTS (Sales & Use Tax System).  They are still able to implement their own rules.  for more details check out DR1002 for the exhaustive (and exhausting) list of jurisdictions with phone numbers, rates and license fees (yep those too)

        2) The above is a summary from my source. She was very patient and walked through several scenarios and the above is a summary.  it is NOT meant to be exhaustive, but directional and cover most situations.  As always do your own research to make sure your situation meets the criteria of the regulations.

        3) I did not delve into out-of-state business selling into Colorado and how the Nexus rules impact the same or different relative to Sales Tax waivers to Use tax obligations. 

         

        Happy Holidays! I hope we all meet Nexus this year 🙂

         

        Barb 

        P
        purplehyssop
        July 20, 2023

        I too am located in Colorado and I ship in state to other cities and counties and out of state. Our sales are over $100,000 now. Everything I have found out tells me that Quickbooks has complicated and confusing work arounds but really doesn't handle sales tax very well. I have always had problems with accurate sales tax and we started using Quickbooks desktop in 1999. I hate it and dread doing the sales tax reporting each month. With Quickbooks OL a lot of control has been "automated" and so it is even more difficult.

        I am going to try Avalara. I can't get a price unless I do their demo but it sounds like it integrates with QBOL and calculates and files sales tax reports in Nexus cities. The State of Colorado sales tax web page said all county taxes are collected by the state so the silly home rule cities are what I have to deal with.

        So frustrating that Colorado's legislature passed this. Most states do not have this issue-the state collects all sales taxes and distributes them to the counties and cities so business only have to file one report. 

         

          M
          mainah65
          August 6, 2023

          I have sales of $593,008.21  and sales tax rate 5.5%   QB reporting shows the same $$ as Taxable sales, there is ZERO problems there....the Taxable amount agrees.   QB decides to calculate the sales tax as $32,615.38  DO THE MATH.  

          Sales tax payable on this amount is: $32,615.45   This has been happening for 10+ YEARS.  I TRY AND TRY AND TRY to tell QBO they have issues, and NO they don't listen.  

          I am required to report my sales tax via the State Online portal....another check for the amount.  THE STATE calculates the sales tax payable....and comes up with the amount I SAY NOT QBO.  If the Sate and the calculator states a correct amount and QBO is different, YA THINK THEY COULD FIX IT.  How hard is it to program in the CORRECT sales tax payable rate 5.5%  or .055 ???   BUT YET after 10+ YEARS, QBO can't get it together to fix it.  I called this AM, spoke to a pleasant foreign lady who said She can do nothing, has to be during their work hours (today is Sunday...but RETAIL TAKES NO DAYS OFF)..... and I don't have time to take MY TIME to submit THEIR ERROR to them and wait on hold etc....so I make adjustments in QBO EVERY DARN MONTH to match the State (and my) Calculations.  

           

          HOW DO THEY COME UP WITH THE $$ THEY DO????  Waaaaayyyyy off.  An accounting program should never be off .01 ever.   

          this is from STATE: Sales Breakdown
          Gross sales………………………….....….……................................................................... 593,008.21
          Deductions: exempt sales…………................…………………………….......................... 0.00
          Bad debts............................................................................................................................... 0.00
          Industrial energy sales........................................................................................................... 0.00
          Taxable sales......................................................................................................................... 593,008.21
          Sales
          Prepared food liquor tax due................................................................................................. 0.00
          Sales tax due.......................................................................................................................... 32,615.45
          Prepared food liquor sales subject to 8.00%......................................................................... 0.00
          Sales subject to 5.50%.......................................................................................................... 593,008.21

          C
          ChristineJoieR
          August 6, 2023

          I can see the urgency of this matter, @mainah. Please know that we will do our best to get you back on track. Let me share some information about this topic.

           

          QuickBooks is a popular accounting software that can automatically calculate the total tax rate for each sale based on various factors. These factors include:

           

          1. Customer's tax-exempt status: QuickBooks will exclude applicable taxes from their transactions.
          2. Selling and shipping locations: QuickBooks considers locations where you sell and ship your products or services. The tax rates are applicable in those jurisdictions to calculate the total tax rate for each sale.
          3. Nature of the product or service: QuickBooks also considers the type of product or service being sold. Different products or services may have different tax rates or may be exempt from certain taxes altogether.

           

          QuickBooks helps businesses accurately calculate the total tax rate for each sale, ensuring compliance with tax regulations and simplifying the accounting process.

           

          We also encourage you to call our QuickBooks Online support team to see if there are bugs that interfere with the software's performance and see what they can do to fix these errors you've encountered.

           

          For future reference, you can visit this article for your guide on managing your sales taxes:

           

           

          I'm here to help with any questions or assistance you may need regarding sales taxes. Feel free to reach out anytime. Take care!

          M
          mainah65
          August 6, 2023

          1.  We sell CHAIRS.  PERIOD.   CHAIRS.  TAXABLE, 100%.  

          2.  NO SHIPPING. 

          3. State website NOT ME calculates sales tax when I submit it.  STATE is correct.  5.5% of $100. is $105.50 not the $102.20 or some stupid made up amount QBO has.  

          4.  Sales Tax settings are SET to the correct State.  There is NO local tax, No county Tax no other tax EXCEPT State Sales Tax.  1 tax @ 5.5% of sale. 

          5.  QBO settings say it's set for correct State, Correct vendor AND correct % (5.5%)  BUT calculations are wrong.  

          6. EVERY SALE has sales tax checked.  Every sale has a charge for Sales tax.  

          7. NO I have not taken every sale, all 10,000 of them and added the sales tax manually from the invoice.  I assume what comes off on the reports printed in QBO in the amount they actually charged the customer.  (but??) 

          8.  There is NO manual human reason in the face of QBO that can cause this simple calculation to be off, EVERY MONTH, EVERY TIME for the past 10 years!   I've tried to bring it to QBO attention BACK WHEN PREMIERE WAS ALLOWED CUSTOMER SERVICE HELP and dedicated support...and even now when it's pulling teeth to get through to QBO support.  NO ONE has EVER cared, or bothered to try to fix it.  It's on QBO side in the programming.  It NEVER matches the States, OR my calculations.    $50,000 sales tax at 5.5% is $2750.00 or $52,750.00  THere is no MAYBE about it.  it's a fact.  Nothing can change that, except QBO imagination in the calculations.  

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