QB Issue Resolution:

Technically, there’s no sales happened since you returned the payment. So that means, these transactions should not be included on your sales tax.

 

On your screenshot, you’ll need to unchecked the tick-box under Tax column on the invoice. This way, QuickBooks won’t calculate taxes, and the amount on the credit memo will match on the invoice.

sales tax.PNG

Another option I can provide is to create the credit memo that is taxable as well. You’ll want to create a credit memo with the same taxable amount with the invoice. By doing this, it’ll automatically offset the taxes from the invoice.

 

Resolution for Issue 'Clarifications on Sales Tax handling in Invoice When Credits applied' available: Yes (Solved).
Source: Intuit Community forum.

Clarifications on Sales Tax handling in Invoice When Credits applied: this issue or error code is a known issue in Quickbooks Online (QBO) and/or Quickbooks. Support for this issue is available either by self-service or paid support options. Experts are available to resolve your Quickbooks issue to ensure minimal downtime and continue running your business. First try to resolve the issue yourself by looking for a resolution described below. If it is a complex issue or you are unable to solve the issue, you may contact us by clicking here or by using other support options.

Support for credits applied
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Error Recovery for credits applied [Canada]
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