11.19.24 - Sales Tax in QuickBooks Online

Join our webinar on mastering sales tax with QuickBooks Online! Tailored for accountants and small business owners, our guest Alicia Katz-Pollock will guide you through setup, management, and reporting. Discover efficient tracking, identify limitations, and learn workarounds to streamline your finances. Gain confidence with practical insights and expert tips.

Access Alicia's Full course on QBO Sales Tax: http://royl.ws/SalesTax?affiliate=2831794

QB Power Hour is a free, biweekly webinar series for accountants, ProAdvisors, CPAs, bookkeepers and QuickBooks consultants presented by Michelle Long, CPA and Dan DeLong who are very passionate about the industry, QuickBooks and apps that integrate with QuickBooks.

Watch or listen to all of the QB Power Hours at https://www.qbpowerhour.com/blog

Register for upcoming webinars at https://www.qbpowerhour.com/

00:00 Introduction to QB Power Hour Webinar
00:56 Welcome and Panel Introduction
01:28 Sales Tax in QuickBooks Online
02:20 Alicia Katz Pollock's Introduction
03:58 Housekeeping and CPE Credits
06:13 Understanding Sales Tax Setup
10:21 Sales Tax Center Overview
23:28 Product and Service Taxability
26:53 Customer Tax Exemptions
29:27 Collecting Sales Tax on Sales Forms
30:44 Understanding Taxability and Location of Sale
31:04 Shipping Information and Overrides
32:27 Automatic Tax Calculation and Overrides
33:15 Sales Tax Before or After Discounts
33:57 Transparency in Tax Calculations
36:03 Sales Tax Center Overview
39:09 Making Sales Tax Payments
43:31 Adjusting Sales Tax Amounts
51:03 Third-Party Sales Tax Solutions
59:49 Upcoming Events and Community Announcements

Transcript

Dan DeLong: 0:30

Good morning everyone. Welcome to another QB Power Hour. Michelle is not joining us today, unfortunately. She has a memorial to attend to today. So she's not gonna be joining us today, but we do have a great expert panel with us. We have Alicia Katz, Pollock, and, spot or You're back. Okay. didn't know where you went there for, Matthew joining us on our. Riveting discussion of sales tax in QuickBooks online. I know edge of your seat only is necessary for today. But go ahead. I'm going to toss the ball over to Alicia to, introduce herself. Everybody knows me and Michelle and oh, Hi

Matthew Fulton: 1:24

guys, most everybody here probably knows me as well. Matthew, my friends call me spot, founder of parkway business solutions and QB community live Facebook group and a non lover of sales tax. So this is going to be an exciting conversation. I'm sure. Put a one in the comments if you love handling sales tax. Yeah,

Dan DeLong: 1:46

So Alicia, I forgot to put your bio slide in here. I know you're going to talk a little bit about yourself and I'm going to stop sharing for a second so people can see you, but Introduce yourself for those that don't know who in the world you are.

Alicia Katz Pollock: 2:00

All right. My name is Alicia Katz Pollack and my company is Royal Wise Solutions at royalwise. com. And what I do all day, every day is QuickBooks setups, cleanups, troubleshooting, and especially training. And I have a huge training program at learn. royalwise. com. I'm the co host of the unofficial QuickBooks. books, accountants, podcast with Hector Garcia. I've been a top 50 women in accounting. I've been a top 10 pro advisor. And really what my passion is for some reason, I'm just like incredibly, I have this geek love. Thing with QuickBooks. And so I tell to tell everybody how to use it.

Dan DeLong: 2:43

Yes. And that's one of the things I think as we unpack sales stack today, it's not as bad as we might as it might get the wrap. It's more of just like anything else, it's how you set it up and how you use it. Yeah. There's some nuances to it and those types of things, but as we'll unpack here that it's not so it's not, terrible.

Alicia Katz Pollock: 3:11

No, it's really not. It's the sales tax module. If you use it it's like dead on accurate, but there's so many different places where you can be using it wrong. And so that's what I'm here to show you is like all the things to watch out for.

Dan DeLong: 3:27

Let me go ahead and reshare my slides so we can do a little housekeeping. A little bit about the QB power hour. It's every other Tuesday at noon Eastern. It's now eligible for CPE credit only on the first one. So if you're keeping score at home, this is the second one of the month. So unfortunately, our friends at makers hub are not here to KELOLAND dot com. Help us with the CPE credit, but Alicia your your, platform does give eligible CPE. So that's so if you don't like what you're seeing here today, go over to Alicia's website and you'll you can watch the same thing and get CPE credit for it. But a little bit about we have the, some resources, the PDFs of the slides, recordings and podcasts always available at qbpowerhour. dot com slash resources and we will share the link for today's handouts as well in the chat and questions. So if you have questions today, you're welcome about sales tax or things of that nature specific topics that we're talking about today, please put them in the Q and a, because it will be super helpful for us to follow up with that. If we can't answer it live on the webinar today if you have general grumblings, like Matthew said about, I hate sales tax, please put them in the chat, so we'll. Meant because it, as it gets scrolls by sometimes it's hard to catch all these things as they go by. So if you have a specific question, please put in the q and a general comments. Put in the, chat or else I'll hide it on you. And then that no one will be able to chat. We have a store. Please check it out if you have the time. No CPE for today. It's only the first web webinar of the month for our friends at Maker Sub help out with that. And we've got some that's the last slide. So nevermind that, but let me go ahead and stop sharing and then I'll hand it, on over to Alicia to kick us off and bring us up here with a sales tax in QuickBooks online.

Alicia Katz Pollock: 5:35

Okay, is my title slide up?

Dan DeLong: 5:38

It is.

Alicia Katz Pollock: 5:39

All right, excellent. What what Dan was teeing me up for is, this session today is really just a synopsis of the essentials of my full sales tax in QuickBooks Online class. I actually have a two hour class with CPE. And so what I'm going to talk about today is understanding how the sales tax module works setting it up, the activities of collecting it, the sales tax center, making payments, and some of the reports now and I saw MB in the chat said what about troubleshooting? Sales tax is wrong. That is what I don't have time to talk about today. And so the con, the continuation of that conversation would be in my course. And I'll give you a link to that at the at the end. All right. That's about me, but we did that already. Dan, go ahead with your first poll

Dan DeLong: 6:32

and all right. I'm still trying to share. Okay. Yes. Do you, so do you assist setting up sales tax for your clients? So yes, no, or maybe it's just not even in your, scope of expertise. So Alicia what, how did you get, like, how did you dive into sales tax and enough to want to teach people how to use.

Alicia Katz Pollock: 7:00

The grand irony is that I live in Oregon and we don't even have sales tax. Yeah,

Dan DeLong: 7:04

I was thinking that too.

Alicia Katz Pollock: 7:06

Yeah, so it's not even an issue for me, but I live right across the river from Washington. And so I have a lot of clients in Washington and I have a lot of clients in Oregon who do work in Washington, which gives them nexus. And so I had to learn the sales tax piece. The rest of it is just because that's my job is to know everything about QBO. And so I can't let This incredibly important topic slide. So I have to dive in on it.

Dan DeLong: 7:35

Yeah, it's definitely something that is a core function if you sell anything which is typically most businesses, right Matthew? Exactly.

Matthew Fulton: 7:45

Yeah, sales tax, one of my favorite ones was dealing with a used car dealership down here in Ventura. And that's always a fun item because you have to record sales tax based on where the person's residence is in California. So you've got all these different districts, you're having to break everything out was just always such a major nightmare and we'd have to have our own little worksheets to try to validate it. So it just pushes you in to figure it out. Nowadays, with everything. We have clients all over the place. You just have to know the things. It's tough to stay on top of it all.

Alicia Katz Pollock: 8:20

Really true. And in this poll for the people who are saying no, they don't assist their clients in getting set up. Once you see what we're going to do today, you might want to actually add this into your scope of work and then bump up your rate for doing it.

Dan DeLong: 8:35

Yeah, especially if you're if you're used to. Just trying to set it up inside a desktop where the entire burden of knowing all of the things is, on who is setting it up. QuickBooks Online assists in some of that process.

Alicia Katz Pollock: 8:53

Exactly.

Dan DeLong: 8:53

Let me go ahead and end the poll and I'll show you the results. Looks like 69 percent do, that. I had to make sure I didn't just say do. Crap, now I did.

Alicia Katz Pollock: 9:06

Yeah, there

Dan DeLong: 9:06

you go.

Alicia Katz Pollock: 9:07

All right, I'm going to go ahead and dive in. Now if you've ever had a session with me, you know that I kind of fire hose you with information. And so you probably will want to go back and watch the recording. I am going to try and cram in as much as I can into the 50 minutes that we have. So you do have the handouts. Dan, you can put the, there it is, there's the handout. All right. So let's talk about what is QBO's sales tax center. Now, if you're coming over from desktop, this is one of the things that's great about it is that there's a, it's almost completely automated and in desktop. You had to put in sometimes a sales tax line to calculate your sales tax manually, and then you had to update your sales tax percentages back in the day. QBO is way more automated, and so you, all you have to do is set up what state you're with what products are taxable and how, and which clients are taxable and how, and then QBO will do all of the math to bring those three factors together and do all of your tracking. So the sales tax is calculated in every single transaction, and the thing that's nice about this is that the rates are updated automatically when there is a rate change up or down. You don't have to go in and fix your QuickBooks. It will automatically do that. One of the questions in the chat is, am I going to be speaking to Canadian taxes? And unfortunately, I'm not. This is specifically for U. S. Okay, so let's talk about how sales tax is calculated, and right now I'm just talking on the big scope. You have to have economic nexus in your state, and so every state has a threshold. Sometimes it's by dollar amount, sometimes it's by the number of transactions, sometimes it's by the dollar amount of the transactions. It also makes a difference whether you're doing work out of your office or whether you're selling off of an e commerce marketplace because if you're selling on Amazon, they're actually going to manage all the sales taxes for you and all the state nexus and then you don't have to do anything. They just draw the taxes and they pay them on your behalf. In most states, services are exempt and you're only paying sales tax on actual physical tangible goods, but that is not 100%. And. Also, some retail sales may have different rates, depending on the region, depending on the product. And there's all of this to think about and all of this to understand. Now, one of the things that's nice is that you'll start by setting up the states where you know you have to. to pay your sales tax, but QBO will keep track of your sales for you and test your economic nexus. And then if you wind up passing one of the thresholds for a particular state, it'll actually give you an alert saying, Hey, you are now eligible to pay sales tax in that state. And the, good news is that once you hit that threshold, that's when you start collecting sales tax. So you don't have to retroactively go back and pay sales tax on sales. That you did not tax it's moving forward,

Dan DeLong: 12:23

but it's unless you pass the threshold and don't set it up And then the state decides to tell you hey, you should have set this up Two years ago. And by the way, you owe us back taxes and penalty.

Alicia Katz Pollock: 12:36

Said. Yes, exactly. Okay. Now, the next element is state versus local. Some states just have one tax across the whole state. Others break it up by city or by county or by parish. And QBO knows that. So when you go into your state, if it's California, all you have to do is set up California sales tax. But if you're in, for instance, here, Alabama, you need to actually go in and set up the sales tax for each of these regions. And then QBO will recognize when either you or the client is in those regions and adjust the sales tax accordingly. One of the elements of that is whether the state is origin based or destination based, meaning that some states calculate the sales tax based on your office's address. And that's easy because you just have one sales tax no matter where you are. Some of them are not. Do the taxation based on where the work is being performed, where the client's address is. And that means that you may have to manage sales taxes for all kinds of regions everywhere where your clients are. And when that happens they do it based on the customer's billing address or the shipping address inside your QuickBooks. And I'll say more. About that in a moment. Okay. And because location matters in many states, it's really important that you're gathering the address information of the clients, because if you're, let's say it's an in state client, Tax your local taxes are applied. If if it's origin based, the local taxes are based on the company address. And if it's a destination state, the local taxes are based on the shipping address for the client. So if you have shipping turned on, that's what it's looking to is the shipping address, not necessarily the billing address. So you have to stay conscious of that.

Dan DeLong: 14:42

Somebody mentioned in the Q and a, I'm just going to toss this one out here about, The customer's addresses and their clients and that they had to copy and paste it. And that's why, right? It's, it has to be in that shipping address field in order for QuickBooks to know where is, where it's actually going.

Alicia Katz Pollock: 15:02

I will address this specifically.

Dan DeLong: 15:05

Okay, perfect.

Alicia Katz Pollock: 15:06

Okay. And then just to mention if it's a state like California where they do their district and their local taxes based on the shipping address, but the county taxes are based on the origin of the transaction, meaning your office. And so there's that hybrid happening, and that's why we love this module because it really does, track all of that for you. It's that rooftop mapping you're talking

Matthew Fulton: 15:30

about, right? Because we have, Westlake Village pretty close to me here. And one part of the town is considered part of Los Angeles County. The other part is Ventura County. So we've all probably got those stories in different states of on one side of the street you have a different tax rate than another side of the street that you have to be aware of.

Alicia Katz Pollock: 15:47

Yeah, everything really matters. I like that, map image that you just gave.

Dan DeLong: 15:52

Yeah, it's like my, next door neighbor when I was a kid went to a different elementary school than I did.

Alicia Katz Pollock: 16:00

Okay, and then the other element is that the invoice date also matters because it tracks rate changes. But then there's also states that have sales tax holidays. For example, in September, August and September back to school. Some states will. Waive the taxes on office supplies so that the kids can go get their office supplies and not pay sales tax on that. So QBO does recognize sales tax holidays in the states where those are eligible. So now we need to set up the sales tax center. And so when you go to the sales taxes, it's in the left hand navigation under taxes. The first thing it's going to confirm is your company address. So this is where it's using the seller's address. Unless it gets overridden with all the other stuff I'm about to show you. So you make sure your address is in there correctly. Then you add in your agencies. If you're converting from desktop, it will match your agencies. But if this is a new file, you'll have to go tell it, these are the states where I am doing business. And then it will know which local and district taxes to apply. You don't need to micromanage it. As I mentioned, there's some states that are home rule states, and so it recognizes which ones have their own sales tax rules. And when you make the payments, it knows, it'll tell you which ones go to what locality or do you, need to, and you do, as I mentioned, have to set up the individual locations if that's part of your eligibility. After you've selected where you are, where you know you have to pay your taxes, then it will ask about your frequency. Depending on your volume, every state has different thresholds, and so maybe you do have to pay every single month. Maybe you have low volume in a particular state and you only have to pay annually. It will ask you on that, and if you're not sure, call your Department of Revenue.

Dan DeLong: 18:05

Is that typically the case where it's based on sales volume dictates the frequency and state by state,

Alicia Katz Pollock: 18:13

it'll actually like right here, it pops up and it's telling you, okay, in Arizona, if you only have 2, 000 in taxes, then you can do it annually.

Dan DeLong: 18:23

Yeah, and that's, based off of the liability, not necessarily the growth sales, right?

Alicia Katz Pollock: 18:29

Yeah, that's the sales tax liability amount, so how much taxes are you going to have to pay? Eh, if it's not that much, then they're not going to make you jump through the hoops. Okay. Then, you also have the ability of making custom rates, and if you are in a state where you have a use tax, maybe you make a custom rate for your use tax. Maybe you have some specialty taxes, like I have a client a gas station in North Carolina, where we had to make a specialty tax for the hot food that he sells inside the gas station deli. So that needed its own special tax rate because he had to pay it to another agency, so we set up an extra one. Also, so you can get creative with it. I mentioned in Oregon, we don't have that. Sales tax. So what, but we do have local taxes where I have to pay a different tax in the city of Portland versus the tri state area next to it versus the rest of Oregon versus anywhere else. So I actually made my own custom rates for those locations so that I could run a report and know exactly how much city tax and Multnomah County tax I needed to pay. So you can get creative with it.

Dan DeLong: 19:39

Another poll.

Alicia Katz Pollock: 19:40

Go for a poll.

Dan DeLong: 19:41

All right. So this one is for those of you that do set up sales tags how many jurisdictions do they, do you find that they tend to have? Is it one? Is it multiple, but less than five or it's, good Lord, it's more than five.

Alicia Katz Pollock: 19:57

Wow. We're pretty even across the board on this one and this just shows you how complicated that is. Yeah. And, you're always better off setting up more than you need if you're not sure if you have Nexus, you might as well. No, I take that back. Nope. Nevermind. That is wrong.

Matthew Fulton: 20:18

Murph actually put in the chat a question and want to make sure I answered it correctly. He was asking, you'd mentioned that when you migrate from a desktop to online, it'll try to match up your sales tax rates for you. So he was asking, QBO first? But if you're doing a migration, my understanding is once you do that migration, it's going to overwrite everything in the file. Anything that you put in there, you'd have to then go in and just try to realign it. I think what you were saying is the automatic ones that exist or pop up, if you have the same things in desktop, that's when it's going to see those the same name and try to establish those for you. Is that right? Yeah.

Alicia Katz Pollock: 20:58

Yeah. And Murph may know some secret sauce that I don't about this, but in general, like you said, when you do a migration, it overwrites everything in the file anyway, so it doesn't make sense to do it. And know that when you are in that that transition period between software desktop calculated it differently, and it's not going to necessarily be in QBO ready to tee up for payment. And so you'll have that transition time of your old sales tax versus your new sales tax that you will have to be conscious of

Dan DeLong: 21:30

without getting too too, deep in the weeds because we want to make sure we, yeah I'm, on here is Desktop and QuickBooks Online handle sales tax fundamentally different, right? You've got an item on your item list for sales tax and sales tax groups and the, calculation method and there's no such thing in, QuickBooks Online. So there is. A path to the automated sales tax, but it's not immediately going to set that up as it goes through because of the way it handles it over instead of QuickBooks online for the automatic. All

Alicia Katz Pollock: 22:10

right. So for sake of time, let's go ahead and move forward. I need to at least cover my fundamentals.

Dan DeLong: 22:16

Yeah.

Alicia Katz Pollock: 22:17

Yeah. All right. So the, this poll pretty much across the board is, it was, yeah, even.

Dan DeLong: 22:26

Yeah, multiple but less than five was the was the most. All right.

Alicia Katz Pollock: 22:34

Oops, moving on. Sorry, hit your button. Okay, now here's the part where people, most people fall down is that you actually do need to pay attention to the sales tax for each product and service, and if you only have a couple, then okay, but if you have thousands of products and services, this can be a bear. Basically there are exceptions, but retail products are usually taxable, and services may or not, may or may not be taxable, so you have to know that in your particular area. And you can see on the image right here down at the bottom. There's either taxable or non taxable and if you go with the taxable based on location only it's going to just do all the default stuff for general taxability in that location and if something is not taxable for some reason it will still respect that but you mark your products taxable if they are taxable in any way. any circumstance, then you do say it's taxable, and then you let the system correct for whether or not you're going to collect tax in that particular situation. Now where it gets more complicated is that some locations have specific taxes. Some will say this service is taxable at this rate, but this one's taxable at this different rate. Or they have different rates for software, digital goods, communications, medical devices, food and beverages, clothing. Florida, for example, has all kinds of crazy taxes. They have different taxes for hair ribbons and flags. Their commercial real estate rentals are different rate than residential. And you want to go into these products. all of your products, if possible, and see if there is actually a specific subcategory that it's eligible for. For example, in this one if you are selling hunting apparel hunting apparel with blaze orange and reflecting materials, that has a specific tax rate somewhere in the U. S. And if that's what you're selling, check it off so that wherever it matters, it's handled. Same thing here, you can see athletic helmets, aqua shoes athletic clothing suitable for everyday wear, like yoga pants, versus athletic clothing not suitable for everyday wear, like your protection cup. You want to actually go through So you actually want to go through your products and look and see if there is a specific category for it and apply those specific categories, then if the customer lives in that area, then it will give them that specific sales tax rate.

Dan DeLong: 25:23

And it's important to note that these categories, just like you said there, when you said something that was, very specific, just because you see these categories in here does not mean they apply to you in your particular case, because, like you said, somewhere in the United States, Hunting apparel with blaze orange or reflective material has a unique consideration for sales tax. Doesn't mean that it does in your particular jurisdiction.

Alicia Katz Pollock: 25:54

And that's where you let QuickBooks make the decisions for them. You just say what is correct and then it will adjust it if needed. Okay, then the next element is that you also have to set your default taxes for, your customers as well. Most of your customers are going to be taxable, but some are tax exempt. Non profits, wholesale with resale, and some Native American reservations some churches, there's all kinds of different taxability. And you can go into every customer as well, and in the customer detail card, there's a section at the bottom to mark whether they are tax exempt, and then you can put in their resale number or their certificate number and keep track of why that customer doesn't pay sales tax. Also, if for some reason you need an override, and honestly, I don't think I've ever really had one of these, where you're selecting a specific tax rate for a customer, then you have that ability also. I'll do that with I was talking about using the custom rates for Oregon, like City of Portland and Multnomah County. That's where I'll go in and say, this customer lives in City of Portland, this customer lives in Multnomah County, and then that will work. Override the tax settings, but in general, you don't do custom rates. You just do based on location.

Dan DeLong: 27:23

Caleb asked in the, chat what about like partial exemptions like farmers in California? Is that something that you could do inside of here where it's, I don't know what the rules are. So

Alicia Katz Pollock: 27:33

here's, here are some of the list, but not the whole list. And so there's just some that are general. And so you can pick off of the list, I'm not, this is just one section of the whole big list. So I'm not sure Farmers is on it, but if it is, then you would pick it. Or you just mark it exempt because you know that they're exempt.

Dan DeLong: 27:52

And then your exemption details, you can put in their certificate number or anything like that.

Alicia Katz Pollock: 27:58

Okay. And Donna's asking a, question. If she has commercial rental sales tax and product sales tax and has the same agencies, do you need two sales tax items for each? One for rental sale? So, that's where it's different from desktop. You, it's, you set your product. Whatever service you're putting on your invoices, whatever product you're putting on your invoices, that's what you set and tell it what it is, and then QBO will make the decisions for you. So yeah, rental sales would be a different line item than product sales. You have different products, so that's what you set the tax on. Okay, so now let's talk about the ins and outs of using the taxes on your sales forms to collect. And so there's a lot of different places where it matters. So the first one is that if an item is set to be taxable, there'll be a check mark right here. And so that's looking at, yes, this is a taxable item, or no, this is not a taxable item. But I'm going to, tell you something important right here, and that is that toggling this tax on and off is a bad idea. Hypothetically, it works because it turns off the tax on the item, but it doesn't always work on the reports. And they told me they've fixed this, but a couple people have told me it still doesn't work. So if you have a service item or a product that is sometimes taxable and sometimes not. taxable, make two of them, make one the item taxable and one the item non taxable and pick it on the form instead of toggling the check mark on and off. That will save some of your reporting headaches later on.

Dan DeLong: 29:49

Keep the hair where it's supposed to be. Yeah. Don't pull it out.

Alicia Katz Pollock: 29:55

okay. So that was part one was the taxability on that item. The second is the location of the sale matters and the new invoices handle this more elegantly than the old invoices did where the, you see right now it says location of sale hidden. That's what. The that tells you what taxable region it's using and if you're shipping an item, then make sure you click add shipping info and what that will do is open up a shipping box and then make sure that you have the bill to ship to matching like you can copy pasted or you can go back if it's going to be a more A multi use client, go back to the client card and make sure that their shipping info is in there as well. Whatever is in the ship to will override. All the other location settings. So the ship from is telling you the default. The ship to is, overriding it. On the old ones and on sales receipts, there's also a box on the far right hand side that says location. That's the same as what is now the ship to. From and if you're in one of those sales forms, whatever you want the shipping to calculate, you can copy it and paste it into that shipping location, not shipping location. Sorry, location box. Unfortunately, I don't have a screenshot for it, but that will override it as well. So this is super important. If you're looking at your shipping and it's looking at your tax and it's not calculating right, use that it. Add shipping info box to get your overrides. now down at the bottom we have the select tax rate and it says automatic calculation. That's what you want most of the time. You do not want to override that with something specific to your state or any of those customs. It works best if you just let it roll. So this is what you want. The ideal situation for how you want it to look. And like I said, PebCat, that means problem exists between chair and keyboard. It means you're doing something wrong. This is where, if you need to override the, tax, you do it in that ship to box. Okay, now down in the bottom right hand corner of your invoices and your sales receipts, you also have this little these little arrows. Is your sales tax before or after your discounts? If you take the discount first, get a total, and then you tax that total, then, you want it by default, but if you want to do the tax and then give the discount at the end, you have that option. So use, click that little arrow and it will rotate the two fields. Now, sometimes you're like, how did they, where did that come from? There is a little let me show it to you. Oh, I don't have it on here. There's a little see the math. Oh, there it is. It's right there. Thank you. Where it says, see the math underneath these. When you click on see the math, it will actually open up and tell you everything about where that calculation came from. The customer's not tax exempt, the location of the sale is this address here's the state tax and all of the relevant county, district, parish taxes, and the total rate that's being applied. And then it'll show you the products and services, and if it says uncategorized standard rate applied, then you just have it on that default of taxable. If you had it for hair ribbons, it would show you what that tax rate is, so it shows you exactly where it came up with the logic. You have the ability to override it by clicking on override this amount, but you better have a really good reason for doing that, and if it's So if you have a problem with your settings, you should actually backtrack, go fix it, and then calculate the invoice before you re, before you resend it. Okay, so that's how it's doing all of the all of the calculations. You have complete transparency, but that you have to have three whole different elements all lined up and dialed in to make it work well.

Dan DeLong: 34:24

Yeah. It's actually the way I, tend to explain it to people with sales tax is there's four themes, right? It's what you sell, who you sell it to, when you sell it and where you sell it. And with that sometimes of when do you sell it because there could be a holiday or day that particularly, you know, that changes the whole thing. And then as far as how much is calculated based on those categories and those types of things, right?

Alicia Katz Pollock: 34:55

Exactly. That's a great summary. And there's a question in the Q& A. Some items want some customers want items drop shipped to various addresses. That's what the ship to is for. You can put it in that ship to just on that one invoice. It doesn't have to be on the customer's card for forever. Okay, so now the sales tax center. It's super important that you use the Sales Tax Center to pay your taxes. What this is showing you is the current accruals, what's up and coming, what you paid in the past, what's overdue. There are also, there's a button here for the sales tax settings, so that you can adjust your settings. This is also right here, where is the economic nexus tracker, where you can go and see how close you are to hitting your thresholds. In different states, and it's also where you go for the reports. Now, on the screen that I'm on, the reports button is on the left. I think that's just because I had the image shrunk. The reports button is usually over on the right hand side. So here, in this example, I've got Arizona and California, and you can see that Arizona has a green box around it, so right now it's showing Arizona's taxes, and then if I clicked on California, it would show California. California's taxes. And then down below the fold on this, you would see every single month you would see if the tax was accumulated, if it's overdue, if you've paid it, it should all say zeros. And you can also see what is up and coming. When you go into the sales tax button that was over on the right hand side, this is where you can see your automatic sales tax agencies and also the any custom rates that you have set up. There is also a history that's the part down below the fold that I was talking about where you can see. Everything about all of your sales tax payments themselves. Now, the upcoming and overdue payments, those are those rows that we just saw. You first, like I said, click on the state. You can adjust the year. You can see this year and last year, but you can't go before further back than that. I wish you could and then you do want to initiate the sales tax payment from this center. Don't just write a check and then categorize it to the sales tax because it's not going to change these numbers. So you go in and you use this where it says view tax return, and then that will start the process of making the payment, but it doesn't make the payment for you. It's not like payroll tax. You still have to go to your state's department of revenue. In order to pay it, however, they are in the process of working on automated payments through the system. They have rolled it out in North Carolina, and they are working systematically through all 50 states in order of complexity, and so I think it's going to take a couple years, but eventually we're all going to be able to pay the taxes right from this window. Okay so now under the reports, there's also three buttons for tax liability reports. I'll, go show the reports in a few minutes. I've got other stuff I want to talk about first. Okay, so there is a reports button. Okay, now when it's time to make your sales tax payments. So like I said, you click view tax return on the far right hand side. And then you'll get a report up that will show you your gross sales, your non taxable sales, your taxable sales, and the tax amount. Now, I'm The, this, there's also a view tax liability report right down, whoops, I didn't mean to do that down at the bottom of it so that you can actually see this in report format. And when you pay this, it will reduce this tax liability down to zero. to zero. Now that gross sales and non taxable sales and taxable sales are calculated not necessarily off of whether you collected the sales tax or not. And there's a couple of you on this call. Jeff Weathers, I know that you've been battling these reports. And that's because if people are unchecking the sales tax check mark, these reports are actually generated off of how many times did this product sell and how much, how was it taxable or not at the time, which may be different than whether you collected the sales tax or not. And that's why I say if it's sometimes taxable and sometimes not. Make two items

Dan DeLong: 39:44

very similar to payroll forms. If you were using a desktop to create payroll forms There are some things on that form that are pulling in data from QuickBooks And there's some things on that form are that are being calculated based on the data that gets pulled QuickBooks So that's an example of those things and I don't want to stress Something that you mentioned and this process here because a tax payment You Inside of QuickBooks is a special transaction. And, even though you're physically you physically may be writing a check or doing an ACH going into the bank register and paying your sales tax, that way. Is not going to it's not, the prescribed workflow, right? And that's, where things get off the rails

Alicia Katz Pollock: 40:36

where

Dan DeLong: 40:36

I've seen people put it to sales tax expense which is never an expense to the company, unless, they're doing it wrong. And then there's a fee, associated with that

Alicia Katz Pollock: 40:49

and I'm actually going to get

Dan DeLong: 40:50

through here.

Alicia Katz Pollock: 40:51

Yeah, going with what you just said, one of the things that I want to emphasize is in this history, if you either manually categorize transactions to the sales tax liability or you change any transactions that have already been processed you may go from number from zero back up to some numbers. In here, and I always reconcile my sales tax liabilities to zero to make sure that all the sales tax collected is what was paid and that no sales tax expenses were categorized from the banking feed, as an, that should have been an expense for other reasons that are in there or vice versa. So I always reckon reconcile my sales tax to zero and I keep an eye on these changes. Now, occasionally, I do see numbers pop up back into here, but after I do the research, my sales tax liability is still zero, and I just don't worry about it at that point. I just otherwise, you pay, you start paying sales tax whack a mole, and you'll make a change to make this zero here, and then it'll affect something somewhere else down the line, and it's just not, it's not worth it. You don't have to work that hard on it. But when you are so going back to the conversation about, paying your sales taxes. So after you have when you have this report up, you then go to your Department of Revenue website and you put in these numbers. They'll ask you, how much was your gross sales? How much was your non taxable? Whatever numbers they ask for, they'll tell you what your sales tax is supposed to be. And sometimes it's right on the head, sometimes there's a rounding error, and it's off by a couple cents. But if you find that the number that they're telling you is completely different, then you need to go back and check your settings. now, if it's a small amount, That you are adjusting. There's that link, but, there's this link right here for add an adjustment. And then when you add the adjustment, you'll pick the reason. Was it a sales tax prepayment? Is it a rounding error? And you'll pick the adjustment date. And then you'll pick the account that you are going to adjust to. Now, the thing is that if you're adjusting up, it needs to be an expense category. And if you're adjusting down, it needs to be an income category. I sometimes have two sales tax adjustments or I have sales tax adjustment income. And then I just put the sales tax adjustment expense just in taxes paid or sales taxes paid. And the reason for that is that when, if you If you overcollected, then you have a little bit of extra sales tax, and so that's income. And if you undercollected, you're paying out of pocket, so it's an extra expense. Now, if you're talking just a couple bucks, it's absolutely not worth micromanaging it. But if you're talking, you've got either a consistent discrepancy or large dollar amounts, then you need to go back and double check your systems.

Matthew Fulton: 43:59

A good example of this, and somebody actually has mentioned it in the comments also, is I was helping one client with their sales tax, and their state, if you paid early, you would get a credit back every month. So you always had this trailing credit piece that you had to enter in as the credit to get it to where you could zero out your sales tax payment every single month.

Alicia Katz Pollock: 44:19

Exactly, So after you set these adjustments, the total tax due should now match what it says on your Department of Revenue website. And then you click record the payment, and then it'll give you the, place to say what date and what bank account you're paying out of. And then this should match exactly the amount that comes in from the banking feed. And what this is doing, like Dan said, is this is actually making not an expense, but an actual sales. Tax transaction that is hitting the liability account to zero it out. And then that's what I reconciled together. Okay. Now, Right now, you still do have to pay on your Department of Revenue website, and like I said you, they're still the boss, and so you want to pay what they, say and like I mentioned, they are working on direct pay, North Carolina is up and running I saw another state go by, but I can't remember what it was my question to them is what if we've got these small discrepancies How are you working that out? And I have no answer for that. That remains to be seen. I'm sure they're wondering that themselves. Okay. Now, when what's super important here is that when you see the transaction in the banking feed, you match it to that sales tax payment that was made. I see a lot of pebcax. I see a lot of people will type in and say, This was my sales tax expense. And either they're duplicating it in the sales tax liability, Category or there have an extra expense and then it doesn't reconcile. So always, Pay with the sales tax center, match in the bank feed. Now, something else that is really cool, they just added reminders. When you're looking at the sales tax screen and you're looking at Department of Revenue, you can add a reminder that you can then have it pop up in your reminders, which show up Only in your home dashboard, if you happen to click on it and notice it. But I use reminders. So it's part of my routine. And so you can also have it email you and then you can say, Oh send it seven days before the deadline or remind me again, one day before the deadline so that you don't forget to pay your sales tax. So this was a nice little value added that just showed up a few months ago. It hasn't been there for very long. Okay, like I mentioned I actually, oh, so it was Wisconsin was, the other one. They are beta testing automatic payments. I love this line. We're still working out pricing. We'll let you know before you're charged. Yeah. This goes to that concept that I've been talking about this on my podcast that Intuit is beginning to rethink how they present QuickBooks and now they're thinking about it as what we take for granted as the features, they're now Thinking about it in terms of modules like add-on modules like QuickBooks payments. We just think about QuickBooks Payments as that's how QuickBooks works, but they think of payments as an add-on module payroll is an add-on module. Online bill pay is an add-on module, and now this sales tax payment is also going to be a. Added on module. So they'll, it'll be free for probably a couple of years until they work out the kinks until they've decided it's worth paying for. And all right, I'll get off my soapbox. Okay. Next I want to talk about the different sales tax reports. I already mentioned the basic sales tax liability report, and that's the one that is available right inside the sales tax payment when you go in to make it. And what this does is it breaks down your gross income, non taxable and taxable amounts by state, by city, by jurisdiction by all the counties. So you can see what goes to each place, and then you can click on any one of those and it will show you all of those relevant transactions. So if you're looking at that going, huh, my sales tax is high, you can drill in and then go see huh, why did cool cars pay 175 in sales tax? That's a lot of tax. And then you can go look at the invoice to go do some research on it. Another one is the taxable customer list, and so really it's just a customer contact list, but it's filtered for your customers who are marked as taxable, and for most of you, that's going to be most of you. There's also a non taxable transaction review report. And so this will allow you to see any transactions that didn't have sales tax applied. So you can go, Huh, wait, why didn't I charge them sales tax? And there's a taxable sales summary as well. And this is nice because now you can actually see your now this isn't in the Sales tax center. This is in the reports center. So you go to reports to go find this one. This is cool, because this will allow you to see how much sales tax you collected by product.

Dan DeLong: 49:58

Is this by products inside of QuickBooks? Or is this by categories that you've assigned those products?

Alicia Katz Pollock: 50:06

No, this is by the products on your products list.

Dan DeLong: 50:09

Got it. Okay.

Alicia Katz Pollock: 50:12

Okay. Now, sometimes QBO's sales tax is not enough. Maybe you do business all the way across the country and you have 50 states that you need to pay tax on. Here are some of the situations when QBO's built in sales tax, automated sales tax module is not sufficient. Again, national sales. Maybe you have international sales. Maybe you have some really complex local taxes. Maybe you're doing e commerce, or sometimes your sales are not recorded through QuickBooks and they're recorded in some other software. So in those cases, you can't use QBO's software. It's not sufficient or it's just too much. Work for you. So the two most popular third party apps are Avalara and TaxJar, which I think was recently bought by Stripe, but both of those are sales tax solutions that you can add into your commerce site or the your POS system or other And then they synchronize to QBO and either you're paying your sales taxes through those solutions or they do the work and you still pay it through QBO depending on your specific situation.

Dan DeLong: 51:33

And the perfect segue is next QB Power Hour, we're actually having Avalara come on to talk about some of their, solutions and how that would actually work. Like somebody was mentioning in the chat we have a POS system that's dumping things into, QuickBooks. And it's only doing that as one lump transaction. So it's really difficult for, QuickBooks online to, parse that out. And that's true. It is actually going to be pretty difficult when it's in there. QuickBooks is pretty good at doing what it's told. But if something is telling it to do things the way you don't want it to, then you have to find some alternative solution to do that. And this may be a good use case for something like that.

Alicia Katz Pollock: 52:20

Absolutely. Okay, good. Now, some questions have gone by in the chat about what to do about fixing sales tax collection errors, but we only have five minutes left, so obviously I can't go into all of that. And I mentioned that what I just went through today is really just the essentials. of the setup of it. It's not everything that there is to know. You're asking all kinds of good questions that I don't have time to answer. Although I think I'd be able to get a couple of them. So I do have a full sales tax class. That's two hours. It does have C. P. E. And Pick up from here and I go into a what do you do when I forgot to charge my customer sales tax and I'm going to go after them to go get the sales tax or vice versa. What if you charge somebody sales tax but you weren't supposed to? How do you refund them? So I those are two examples of of. The troubleshooting that I talk about in my class. Also, I just told you a bunch of stuff when I teach the class, I actually go into the product. Somebody was just saying where are those reminders in my class? I actually make a reminder. I actually go through and I do the sales tax setup and I go into the products and I do the choosing and I demonstrate everything that I just told you. So that class is definitely like the place to go next.

Dan DeLong: 53:51

Okay. Anything, else you on your, slides there?

Alicia Katz Pollock: 53:56

Yeah, just let me do it. Let me do the quick wrap up and then we can either take questions or, go into yours. Here's again that sales tax link. This link over here actually has an affiliate code on it, and that actually gives Dan and QB Power our credit for the referral. And I know I gave you a direct link and a QR code. But if you'll do them the honor of hitting that affiliate link and Dan, if you have any way of pasting that into your webinar chat, then I'd love to share the.

Dan DeLong: 54:28

It is on the, it is on our the landing page that we made for you on our site. So if where the handouts are so you can access it right from there as well.

Alicia Katz Pollock: 54:38

Okay, excellent. And I've mentioned my program a couple times. We call it the Royal Wise Owls, which stands for the on demand web based learning solution. And I have an entire learning management platform with over 50 different QuickBooks classes that are from everything from I've never used it before. I'm converting from desktop. I have no idea what's going on. All the way up through deep dives like this in sales tax, and you can take individual classes or I have a whole membership program where the bronze is like the core classes that everybody needs. The silver is access to the full entire library. The gold also includes an hour with me every single month where we can do hands on work inside your books. The all the memberships come with a monthly members meeting. That I call an open mic where people just pepper me with questions until I cry uncle and then the silver and gold actually have a second, we call it a second mastermind meeting and so there's lots of opportunity for community. If you are with an accounting firm, we also do custom branded training portals. If you need to implement train, QuickBooks training at your firm, I can help with that. I do have a partner program. If you want to recommend my classes to anybody else, like you saw, that we can do affiliate links for you. And I also do content licensing as well. I mentioned that I'm with the unofficial QuickBooks accountants podcast. And so definitely check me out. Check us out on your favorite podcasting app. And I think we have one more poll that we have to run. Yeah.

Dan DeLong: 56:19

Really just would these help? Was this helpful? Did you learn something new? I know I did, and I think I know a lot, but one, one of the things I wanted to mention really quickly, Alicia, and I really appreciate you doing this. The. The sales tax function inside of QuickBooks is entirely hinged in on a sales transaction, right? So if you're using something that brings in journal entries or brings in transactions that are not sales transactions, sales taxes, you're going to be, you're going to be frustrated on on using sales tax. So I wanted to call that out just to make sure that people Might be importing things in or doing things. If it's not on a sale transaction, that sales tax is not going to be calculated properly.

Alicia Katz Pollock: 57:12

That's a really crucial point. So I'm glad that you brought it up. So we're talking invoices. We're talking sales receipts. We're talking also credit memos and refunds also affect sales tax.

Matthew Fulton: 57:24

So the flip side of this as well, which was a question was asked earlier, is now if you also take into consideration where you're buying stuff and if you're paying tax on the purchase or if you're not, and you need to be able to record that to to file your sales tax, like a use tax, so forth. Okay. That's where you have to create your own separate line item, and you'll be putting those on your bills or your expenses, recording the amount there, so then when you go, the sales tax center is only going to show you the actual sales tax, that's owed, you'd pull up the separate report to figure out what your adjustment would be before you finish your filing, basically.

Alicia Katz Pollock: 58:01

Yeah. Now, some of you are in really complicated situations where you actually need to go in and cross reference your reports and make sure that it's all working. And I hear from people, honestly, that it doesn't quite match up sometimes. But for normal routine sales, you're, within spinning distance enough that your, state's not going to care if you're off by three bucks.

Dan DeLong: 58:27

Exactly. So I appreciate that. That was like a. Sandwich mushing of, sales tax. Alicia, I really appreciate you joining us today. And really unpacking the E I don't know. What do you, what are the nuances of it? Met a lot for words. And, I wanted to really thank you and Matthew for joining us today. as we're coming up on Thanksgiving, Having folks like you in this community, willing to, educate the folks that, that need it is, just one of those things that we were talking at, into a connect about just how this community is, so unique. That we, being able to lift us up and elevate each other is is fantastic. And. Just a little thing that I, created from my little AI helpers that I have is a gratitude guided meditation. It's totally free. You can check it out on on School of Bookkeeping. I put it in the chat there. You can, it just allows you five minutes of just really Thankfulness, reflectiveness, and guiding your just taking a little break so that sometimes we get so wrapped around the, minutia of things that we're doing each day. Just really need a, reset and hopefully that's, that, that helps.

Matthew Fulton: 1:00:13

Thank you. I'm grateful for it.

Dan DeLong: 1:00:16

And then one last thing I wanted to, I know we're a little over, if you guys can stay, that's totally fine. We wanted to talk about Michelle. And as that she is, he is semi retiring and since he's not here and hopefully she's not watching, we can talk about her behind her back. But what I was hoping to do is the last QB Power Hour this year is surprise Michelle. And what I wanted to do is, create just a space where you know, people who have had interactions with her or been affected by impacted by, Michelle, I know I have. A, just a moment to to express their appreciation for for Michelle, and I'm trying to create a, a little, video. So there's a link that I just put in the chat. If you want to click on it you can record a little thank you video or just anything that a memory of you with Michelle or impact that, it might had in this, whole service here, we'll create and compile those, those snippets for her and we wanted to share that with her as a thank you for our last Community Power Hour, which will be December Before the holidays, let's see, that's going to be the 17th of of December. So if you have time on your calendar you can, join us. Great. And we'll, make that a little bit more, Pretty flowing conversational. It may not take the whole hour. It may take two hours. I don't know. Appreciate if you could help us out with with sharing your thoughts about about Michelle and the impact that, that you've had or that she's had over over your career.

Alicia Katz Pollock: 1:02:31

Michelle taught me one of the most important things that I needed to know about bookkeeping. I remember it at my first QuickBooks Connect and that was that Opening balance equity needs to be zero, and you zero it out by moving it to retained earnings. That fact had escaped me 15 years ago, I did not know that, and I remember, I still actually remember Michelle I have a visual of her saying that, because it was just like, I have work to do. Yeah,

Matthew Fulton: 1:03:02

many things learned from her. My best memories, of course, are having the opportunity to hang out and talk with her at the different conferences. But I want to remind everybody, we're counting on the fact that she's not going to go back and watch this episode. So that also means don't go and tell her what we're trying to do. We're going to do our best to try to keep this a secret on something that's publicly available knowledge wise, but don't tell anybody. So except your friends.

Dan DeLong: 1:03:25

Yeah. So we want to try to keep it a surprise, but I, It's bound to leak out, but I'm sure she'll act surprised even if she, knows. Awesome. All right. I appreciate y'all joining us here today on the QB power hour. We'll see you next time. Again we'll be having Avalara on to talk about a little minutia details about those things that we need help with with a service or software that that can help out with with sales tax. And we'll see you next time and have a great Thanksgiving, everybody.