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Tracking and Paying Sales Tax

Lecture Slides are screen-captured images of important points in the lecture. Students can download and print out these lecture slide images to do practice problems as well as take notes while watching the lecture.

  • Intro 0:00
  • Setup Tax Rates & Agencies 0:44
    • Setting Up Sales Tax Code List
    • How to Set up Tax Rate for Example City
    • Add New Item to Item List
    • Checking and Editing Item Through Vendor Center
  • Grouping Single Taxes 7:50
    • Why Taxes are Grouped
    • Creating New Sales Tax Group
    • Choose Tax Item to Add Into Group
  • Indicate Who and What Gets Taxed 10:45
    • Add New Customer To Assign Tax To
    • Invoicing Customer
  • Apply Tax to Sales 14:30
    • Editing Item and Choosing Tax Rate
  • Create a Sales Tax Liability Report 15:26
    • File Sales Tax Return/ Creating Liability Report
  • Use the Sales Tax Register 18:14
    • How to Read the Sales Tax Payable
  • Paying Your Tax Agencies 19:34
    • How to Pay Sales Tax
    • Choosing Which Items to Pay For
    • Print Checks

Transcription: Tracking and Paying Sales Tax

Welcome back to

This is QuickBooks lesson: tracking and paying sales tax.0002

Now, this is one of our most fun things of life is collecting and paying sales tax in our business if you are selling items on a retail basis.0007

So, this lesson is going to go over and review with you how to go ahead and set up those various tax agencies in QuickBooks, so that you can properly0020

assign and charge the sales tax to your customers based on the area in which you are selling, as well as turn around and pay those tax agencies the tax.0032

So, the first thing that we are going to do is we are going to talk about setting up the tax0044

rates and the agencies in QuickBooks so that you can go ahead and monitor that properly.0047

Now, our tax rates, of course, one of the first things we want to look at is on our Lists menu, we will notice that there is a Sales Tax Code list.0052

And you may already have these two items, which is Taxable Sales and Non-taxable Sales.0066

So, there are times when we might have services or products that we are selling that are not taxable.0074

We might be selling them on a wholesale basis to someone else, and so it is a non-taxable sale, and in this case here, we have both of those.0080

So, those are already set up.0091

If they are not, we can go ahead and add the sales code and make sure there is a description0093

code that is Taxable sales and then, a code that says Non, which is Non-taxable sales.0099

In this case, we already have it there and that they are taxable, OK?0104

So, I am going to close that down, and we are going to talk about setting up new tax rates.0108

In this example, I am going to use Los Angeles since we have a decent tax rate in the Los Angeles, California area, and we are going to use City of Me.0114

And the City of Me has a city tax of maybe 0.5%. The County has 1.5%, and the state currently has a 7.5% sales tax.0127

So, when you add all that up together, you have got a pretty much a 9.5% tax rate.0139

We are going to go ahead and set that up so that when we do business,0146

sell product to the customers within the City of Me, we can go ahead and charge on that 9.5% sales tax.0149

So, on our Lists menu, we are going to pull down our Items, and I am going to go ahead and resort this list by type so that I could look at the tax items there.0158

So, up in the title bars here in our Item list box, I am going to click on Type to organize it by type of service.0168

And we will notice down here, we have Sales Tax Items for East Bayshore. There is Out-of-State Sales Tax at 0%.0181

There is Santo Domingo. There is Santo Tomas, and there is East Bayshore County, which is a conglomerate of a couple of county in the City of East Bayshore.0188

We are going to use my example of setting up the City of Me, and we will set that up.0201

So, of course, when we are going to do that, we are going to look at the California state. We want to set up that as a 7.5%.0206

We are going to set up the county at 1.5%, and we are going to set up the city for 50%, and then, we are going to combine them as a group.0216

So, let's do that first. The first thing we want to do is add a new item.0223

So, we are going to click on Item, and we are going to say New, and on that, we will see the type of service that it is.0227

And at the bottom, we have Sales Tax Item, so I am going to choose Sales Tax Item.0238

The first tax name I am going to do is CA Sales Tax. I want to call it California Sales Tax, and I will just type that out here, and what is the percentage rate?0243

Under the Description, I typed in the California Sales Tax, and under the Tax Rate Percentage, I am going to say 7.5 and hit tab.0259

Here, it says the tax agency for that is, of course, the State Board of Equalization, which is already there.0268

The California State of Equalization is the entity in California for collecting and paying those state taxes.0274

You might have another state. You might have another name for their tax agency.0282

But, in the California, it is the State Board of Equalization, so check in your area to see which agency you have to pay.0287

I am going to go ahead and click on Next because now I have set up that, and I will able to now add another one.0294

So, I set up the California for 7.5%, and I am going to set up the county ,and I will call it LA County.0304

So, here, I will say the Tax Name is LA County, and I will say Los Angeles, type it out in the description, Los Angeles County Tax.0307

And we will call it 1.5%, OK? And this is also the State Board of Equalization, and we are going to pay that too.0321

So, the county is always collected and paid by the State Board of Equalization.0328

So, we have our county, and we have now our state, and I have got that set up, and we will click on Next.0333

We will notice that they have added them over here at LA County and California Sales Tax, Yippee Kayee.0339

Our next tax name we are going to set up is the City of Me. That is cool, City of Me Tax.0344

And that is the City of Me, and that is 0.5%, and that is going to be payable to the City of Me, OK? That is my city.0356

If you have a different city, City of John, City of Sally, use that.0370

We are going to go ahead and click on OK now that we have those set up 0.5% here.0374

And we are going to see that the City of Me is not there yet, so I am going to go ahead and Quick Add it.0379

I want to make sure that it is there, and I will add that agency to the list there.0386

I can actually go and set it up and put in the city and state and address and all that0393

later of where we are going to send that wonderful city tax to when we collect it.0398

So, now, we notice that we have add in to our Item list the City of Me tax, the LA County tax and the California sales tax, all three of those.0405

In fact, I forgot to put in the LA County tax, so, I am going to edit that.0413

By clicking on Ctrl+Edit, I am going to add LA County and put tax at the end of it, make sure that is done properly.0418

So, now we have all three taxes there. So, we went ahead and showed you how to create and set up those tax rates and those agencies.0426

We set up the City of Me agency. There is the State Board of Equalization, which was already there.0434

But, to make sure that, that agency is there, we can go to the Vendor.0438

And I can go to the Vendor Center through Vendors, and I can go down to City of Me and find that.0441

Oops, I did City of Me. Where is...oops, there it is.0450

And we can go ahead and make sure that, that vendor is set up properly by editing it.0452

And we can edit the address City of Me and where the bills are going to go to, OK?0457

I will close down the Vendor Center there and the Vendor Item, and the next thing we want to do is look at grouping these together.0463

So, when I make a sale of a product, I am selling pens - I love to have pens - and when I sell this to customers, I have to charge a sales tax.0471

Well, when you go to the store, normally, you just get hit with whatever tax it is in that particular area.0484

And the tax varies per city and per county that you are in and throughout your state.0491

In this particular situation, they do not go ahead and assess you the city tax separately, and they do not assess you the county tax.0496

They do not assess you the state tax separately. It is all one tax.0502

So, we are going to do the same although, it is three different entities.0507

So, we are going to group those and create a group- grouping those single taxes, and we are going to do that.0511

We will call it the California City of Me/county tax, OK, so we will set up a new item called that because we are going to group those three together.0517

So, when we sell these pens and pencils to people and we assess tax, it will calculate that 9.5% tax total.0527

I am going to choose from our menu item drop down list, New. I can always do Ctrl+N to open up a new item.0536

And this is going to be a sale tax group by the way, and the group name is going to be City of Me.0546

I am going to do /county and state, OK, tax, or I will just say C-N-T-Y and state tax, OK?0553

And this is City of Me county and state tax, OK? That is my description, pretty much the same thing.0564

And I want to make sure it is identified properly because that is what we are doing, the county and state, OK? And I will abbreviate state by S-T, OK?0575

Now, we have got our group name. We have our description, but we want to add the tax items that we are going to choose for the City of Me0585

So, the first tax item is going to be City of Me. That is going to pull it in.0591

We are going to choose that from the dropdown menu list, and it is going to pull it in.0594

The next item just below the City of Me, we are going to drop down the list again, and we are going to choose LA County.0598

So far, our group rate is 2%, and then, we are going to choose our third one, which is the California state tax, and that is 7.5%.0604

Notice it pulls in what tax agency is there and the descriptions, and of course, the rate is a total of 9.5%.0612

So, whenever we apply that particular tax to the sale within the City of Me. they are going to be charged the proper rate.0619

At this point, I have everything I need, the Sale Tax Group, Name, Description, and the three individual, single tax items are included in this group.0627

I will click OK, and it adds in the City of Me county or state, so we have that taken care of.0637

Now, of course, we can assign tax to various customers that they get.0644

Let's say they live in East Bayshore, so we are going to assign them a particular county or state. We are not going to assign them to the City of Me.0649

We are going to assign them to the East Bayshore customer.0657

If we have customers that are in City of Me, we are going to assign that to them.0660

So, let's go ahead and add a new customer that lives in the City of Me, and we will assign the tax to that just as a quick little exercise.0664

So, I am going to go to the Customer and go to the Customer Center from the dropdown menu list.0677

Of course, from the Home screen, I can choose the middle left that says Customers and go to the Customer Center there.0683

I am going to do a new customer, and this is just going to be City of Me Auto Parts or Auto Sales or something.0690

No, no, the City of Me, I do not know, some sort of company here. It is going to be City of Me Pest Control.0702

There it is, City of Me Pest Control, OK, and it is going to be City of Me Pest Control.0716

And we are just going to make sure that, that name and address is in there.0722

And we will put them in there as 123 Main street, and it is in the City of Me California, 91111, OK?0726

So we have our customer, alright, and that is neat, so we are going to go ahead and add him.0736

I am going to edit that customer in the Edit field, and I can say "OK, that is really neat that we will have them".0740

I can go ahead and then say "Here is, under the additional information tab for that customer, there is sales tax information".0747

And I am going to go ahead and tax them on sales, but he is not in Saint Thomas.0756

No, I am going to charge him the City of Me sales tax, OK? And that is what he gets.0760

So, every time we do an invoice to that, it is going to pull up the City of Me tax.0767

So, we have assigned that to him, to that customer, and I will go ahead and do an invoice to show you how that works.0774

I will go ahead and click OK on that, and we will invoice this customer.0783

We are going to buy some items, so we will call it City of Me Pest Control.0786

They are buying some...Let's see here. Let's find out something we are going to apply some tax to.0791

Let's just say a frame. I do not have enough there to sell, so let's do some...Here we go.0803

We will do a door frame. There we go- door frame.0814

We are going to sell one door frame, OK.0819

And notice by choosing that door frame at the very bottom of this invoice, it shows the tax is City of Me at 9.5%.0821

So, when I sell him the door frame for $150 - kind of expensive - it assesses that tax, OK.0829

Let me just do it as $100. We will sell him $100 door frame.0838

Hopefully, there is a pest control company, and it is assigning the 9.5% tax rate to them, OK.0844

So, I click on Save and close, and we have just invoiced that with the new tax rate, OK?0851

And that is how we are able to do that, by grouping the sales indicating who and what gets taxed.0859

We have done that, and then, we have applied it to a sale.0865

So, we can also go to our Lists menu and assign certain things that get taxed. Blueprints are not taxed, of course.0868

We can edit that blueprints, and is it taxable? And it is non-taxable?0879

We are not going to tax blueprints, but we do want to tax other things. For instance, we might want to exterior door frames.0884

If we choose on that, we pull up the Edit item, and notice down here under the Sales Price, it is taxed.0894

OK, and it is a taxable item. OK, and that is how we assign that taxed item to the items there0901

by editing that item, going to the sales section and choosing that either Non or Taxed.0909

And, of course, assigning each customer...we are going to assign at the particular geographical area in which they are taxed.0917

And then, we can assign that, so we have applied that tax.0923

Now, the next thing we are going to do is we are going to create a Sales Tax Liability Report now that we have made a sale- City of Me.0926

We have to remit that tax to that particular city and to the State Board of Equalization.0933

We need to make sure we file our sales and use tax return there.0939

And that is always a fun thing because we love to collect taxes on behalf of our customers.0946

So, we are going to be talking about creating that liability report now.0952

I am going to close all my windows down, OK. And to create the liability report is quite simple.0957

If we go to our Vendor list, OK, our Vendor drop down menu, we will see an item here close to the middle.0965

It says Sales Tax, and we will see there is a Sales Tax Liability.0972

If we choose the Sales Tax Liability, it will pull up a liability report for us for a particular given time.0977

Here, it shows our total sales, total non-taxable sales. This is all the information that the Board of Equalization at least asks for.0985

So, when your tax agency asks for a sales and use tax return, they will ask you for total sales.0994

They will ask you to break that down as non-taxable sales as well as the taxable sales.0999

So, you notice here, this report gives you that information that you can now use to complete your sales and use tax return.1005

It will give you the rate. It will give you for each of those counties and for the city, OK?1014

I am going to break it down. If I change this date out here a little bit, I should be able to pick up my latest little tax for City of Me tax.1022

So, here, If I change the date to include the invoice that we did to the City of Me Pest Control,1038

it will show that city taxes well that we collected- the 50 cents that needs to remitted to that agency.1045

And we will notice that we have for the State Board of Equalization,1056

it includes all the different counties in which we have collected the tax for and gives us a lump sum of what is due1061

Here is the tax collected and what is payable as of January 20th, 2017, OK?1069

So, we changed our day a little bit further down. It should give us the amount payable adjusted slightly, but here we have it.1076

So, that is our Tax Liability report.1087

Now, we can go ahead and pay those, or I will actually show you how the register works.1092

The register and the tax liability works very similar to a check register, any other register.1099

So, we want to look at the Sales Tax Payable Register from the Lists menu.1107

We will look at the Charts of Accounts, and we will scroll down here and at the Liability section where it says Tax Payable.1111

QuickBooks automatically adds this account whenever we activate and start utilizing these sales tax and taxes.1117

So, If we double click on Sales Tax Payable, it will pull up a register for us so we can go ahead and look at the transactions.1127

We will notice here that here is the City of Me from the invoice 1118 that we created for the City of Me Pest Control.1135

And it shows the 50 cents there that was added along with the invoice for the LA County and the California sales tax.1144

So, it gives us an idea of what transpired there at least for the taxes, so it bills out that amount.1152

We collect that amount, and it is now, then, payable to the agencies there.1161

So, we can go ahead and pay the taxes, and I will show you how we can pay those taxes now, paying that tax agency.1169

So, let's say we want to pay our State Board of Equalization all the taxes due.1179

From the Vendor dropdown list, we are going to go back to our Sales Tax area, and we are going to say "Let's pay sales tax".1185

Of course, this date is a little wrong, so I am going to choose the day a little bit and go one month in advance to the 15th of January of the next year.1194

And we will do it again through the 15th of January, and it will pull up what we have.1207

So, here is our taxes. Here is the City of Bayshore, City of Me.1214

I only want to pay to the State Board of Equalization, so I am going to choose all those that say for State Board of Equalization.1220

I am going to write a check for those items that are due to the state. I am going to assume that the cities are not due yet.1228

They are due maybe a few months down the road. It is just I want to choose those.1236

So, we will go ahead and select those items that are due, and it will tell me that I have selected those.1241

I will go ahead, and it is to be printed, and I will click on OK, and it went ahead and set up a check.1251

It shows that I just paid those. In my tax liability report, it says that it is paid.1258

If I go and take a look at the check, so I can drop down the file menu and say Print the forms and print checks.1266

And there it is. State Board of Equalization is ready to be printed and paid, so all we got to do now is print that check and mail it in.1274

So, that is our sales tax and our tax agencies, and now, we can go ahead and make sure we have complied with all of those properly.1283

Again, thank you for visiting We will see you next time.1296