How do I set up and track sales tax?

To set up and track sales tax in QuickBooks Online, you first need to configure your sales tax settings. This allows you to assign default rates and automate tax tracking for customers and items.

Turn on sales tax

1. Select the Settings gear icon.
2. Select Taxes (or Sales Tax depending on your view).
3. If you haven’t set up sales tax before, select Set up sales tax or Add tax.
4. Follow the on-screen steps to add your tax agency and tax rate(s).

Configure sales tax settings

Once sales tax is enabled, customize your preferences to streamline data entry:

1. Go to the Settings gear icon and select Taxes.
2. Select Edit sales tax settings.
3. In the Sales Tax Settings window, make your selections:
   • Do you charge sales tax?: Select Yes.
   • Default sales tax rate: Choose the rate you want QuickBooks to apply automatically when you create transactions for taxable customers.
   • Mark all new products and services taxable: Select this to automatically check the Tax column for new items you create. You can uncheck this manually on specific forms if needed.
   • Mark all new customers taxable: Select this to treat all new customers as taxable by default. You can edit a specific customer’s profile later if they are exempt.
4. Select Save.

Manage individual taxability

While the settings above provide defaults, you can adjust specific records:

• Customers: Go to the Sales or Invoicing menu and select Customers. Open a customer’s profile and select the Tax info tab to edit their tax status or exemption code.
• Products and Services: Go to the Sales or Invoicing menu and select Products and Services. Edit an item to check or uncheck the Is taxable box.

Note: If you have existing transactions with sales tax, you must remove the tax from those transactions before you can disable the sales tax feature entirely.