Sales Tax Overview and Rates
Sales tax is a fee charged by government agencies on the sale of products and services. It is typically a percentage of the sale price. Your customer pays this fee to you, and you are responsible for remitting the collected funds to the appropriate tax agencies.
Because sales tax laws vary by location and business type, we cannot determine your specific tax obligations. You will need to consult the following resources to understand your requirements:
- State and local government websites: These usually provide detailed information on what is taxable, current rates, and filing frequencies.
- Your accountant or a QuickBooks ProAdvisor: A tax professional can offer guidance specific to your business situation.
- Sales tax automation services: These can help determine rates and manage compliance.
How QuickBooks Online calculates sales tax
QuickBooks Online automates sales tax calculations based on the settings you configure in the Sales Tax Center.
- Set up your tax agency: You add the tax agencies you report to, such as your state or local tax department.
- Add tax rates: You create a combined tax rate or add single component rates for the areas where you do business.
- Assign tax to items: When you create products and services, you can mark them as taxable. QuickBooks applies the correct rate based on the customer’s address and the item’s tax status.
When you create a transaction (like an invoice or sales receipt), QuickBooks automatically calculates the tax due based on these settings. You can review and adjust the tax amount on the transaction form before saving.
To access these settings, go to Taxes (formerly Sales Tax Center) in the left navigation menu. From there, you can manage your agencies, rates, and filing history.