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Setting Up Sales Tax in QBO

Sales tax laws are different from state to state, but there are enough similarities that QuickBooks Online (QBO) has a method that fits most users.

Sales tax setup and tracking has to be flexible. Not only is it different from one state to another, rates can change between counties and even cities.

Let’s look at sales tax tracking in QBO. Even if the sample file is a company in California, the features in QBO work the same anywhere.

If you need to start using the sales tax feature in QBO, you will click Taxes in the left-hand panel menu. Choose to Edit sales tax settings. You will have the option to select Yes, you want to charge sales tax.

A QBO file that has sales tax enabled, has access to the Sales Tax Center. Here is the Sales Tax Center in the sample file:

Notice that the sales tax amounts are grouped by sales tax agency. Thus, in the sample file, some entries are under the Board of Equalization for California and some under Arizona Dept. of Revenue for Arizona.

We will look at this from the beginning and create a new rate.

In the right portion of the Sales Tax Center is a link that reads “Add/edit tax rates and agencies. We’ll click on that.

Above is the screenshot of the list of sales tax rates that opens. These are the rates that already exist in the sample file.

We’ll select New to create a new rate.

This setup is pretty simple. Note from the arrow in the graphic that this is a single rate. This is the simpler setup. It means that the entire amount of sales tax we collect will be paid to the same agency, in this case, the Board of Equalization.

If your state requires the payment of different components of the total sales tax rate to be paid to different agencies, you need the Combined tax rate.

We have entered a rate for customers that live in and that we work for in Mountain View. The city of Mountain View has a sales tax rate of 8.75%.

Once we choose Save, we are returned to the list of sales tax rates, only now, our new rate is in the list.

The last step in setting up the new rate is to define those Mountain View customers where we need to charge the new rate. We do that by editing the specific customers needed.

Our customer Amy Lauterbach is now set so that any sales to her will be recorded as subject to the Mountain View sales tax. QBO will collect the right amount of tax.

In future posts we’ll look at collecting and paying sales taxes in QBO.


Hector Garcia, CPA
Certified Advanced QuickBooks ProAdvisor
7791 NW 46th St. Suite 109
Doral, FL 33166

Hector Garcia

Hector Garcia

Hector Garcia is a CPA and QuickBooks Consultant.

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