Sales tax is one of those necessary evils when you own your own business. It’s a pain to track, collect and pay it, but QuickBooks can help out with some of the nitty gritty reporting, whether you are in a state that has one state-wide sales tax rate, or if you have different rates for different counties or other jurisdictions.
As with anything, it’ll take a little bit of time to set it up properly, but once you’re set up, then you should be pretty much good to go.
I’ve found some very VERY good tutorials, and I’ll link to them below. If you need further assistance, we offer QuickBooks set up and training from our staff of QB ProAdvisors. Give us a call at 770-478-7424 and we’d be happy to help you get your QB up and running (whether or not you are in Georgia)!
These tips are for if you invoice your customers.
How to set up sales tax in QuickBooks
How to set up sales tax with different rates for the same customer (ex. alcohol at 9% all other sales at 7%)
Now, once you’ve set up QB to use sales tax, and you’ve invoiced your customers, you’re ready to pay your sales tax.
We recommend running a Sales Tax Liability report before you actually go and pay your sales tax. This ensures that everything matches up. To do this, go to Vendors > Sales Tax > Sales Tax Liability. Check the date and make sure that QB is showing you the period that you want, whether you pay sales tax monthly, quarterly, or annually. In Georgia, at least, we need all of the information on this report to properly fill out the Sales Tax form for the state. Take note of the total sales, exempt (non-taxable) sales, taxable sales, and then the total amount of sales tax due. You can go to File > Save as PDF and save this report as a PDF on a folder on your computer.
Now, to pay your sales tax, go to Vendors > Sales Tax > Pay Sales Tax. A window will pop up asking you the account and the dates. Fill in the account that you’d like to pay your sales tax from, and then enter the date. Be very careful here! You want to make sure that you are paying for the proper period (usually last month, quarter or year). Once you’ve checked that the amount matches the amount from the report you generated earlier, then check the appropriate sales tax line and hit OK.
What about Vendor’s Compensation?
Here in Georgia, if you pay your sales tax on time, then the state lets you keep a little bit of the sales tax that you’ve collected. This is called “Vendor’s Compensation”, and it’s very nice of them to do that, but sheesh, it’s just one more bookkeeping step that you have to think about when you’re trying to run your business. Here’s what we recommend:
- Have an income account set up to track the vendor’s compensation. We usually have it listed as “Other Income” type, and just call it Vendor’s Compensation.
- Reconcile your bank account first.
- Use the sales tax liability report mentioned earlier to go online and fill out the sales tax form from the state. As you fill out the form, the website will notify you of the Vendor’s Compensation amount. (In Georgia, it’s 3% on the first $3,000 of sales tax).
- Now go to Vendors > Sales Tax > Pay Sales Tax. Check the dates, account, and amount (this will be listed at the total sales tax due) and then click the “Pay” checkmark button in the window. Now, click on “Adjust”.
- Make sure the Sales Tax Vendor is correct (for example, “Georgia Department of Revenue”)
- Choose Vendor’s Compensation as the Adjustment Account
- Choose “Reduce Sales Tax By” and then fill in the amount that you were notified of as you were filling out your state form.
- Make sure both line items are checked, fill in the check info (for GA, you are probably paying online on the GTC, so we recommend putting “online” or “EFT” for Electronic Funds Transfer), and then click OK.
Hope this helps!! Feel free to leave questions in the comment box below, and we’ll do our best to answer them.