QuickBooks 2011: The Missing Manual

Setting Up Sales Tax

If you don’t have to collect and remit sales tax, skip this section and give thanks. Sales taxes aren’t much more fun in QuickBooks than they are in real life. Confusingly, QuickBooks has two features for dealing with sales tax: codes and items. If you sell taxable and nontaxable products or services, Sales Tax codes specify whether or not an invoice item is taxable. Sales Tax items, on the other hand, let you calculate and organize sales taxes charged by state and local authorities for the items on your invoices or other sales forms. This section describes both features and how to use them. If you sell products in a place burdened with multiple sales taxes (state, city, and local, say), you can use a Sales Tax Group item to calculate the total sales tax you have to charge. Your sales form shows only the total, but QuickBooks keeps track of what you owe to each agency.

Note

Before you can dive into the details of setting up sales tax, you need to turn on QuickBooks’ sales tax feature. Sales Tax explains how.

For most product sales in most areas, you have to keep track of the sales taxes you collect and then send them to the appropriate tax agencies. Labor usually isn’t taxable, whereas products usually are. Creating separate items for labor and materials makes it easy to apply sales tax to the right items or subtotals on your invoices. Separating the items you’ve identified as taxable or nontaxable can help you decide whether you need one or more items for a particular ...