QuickBooks-Changing Sales Tax Rate

by Debbie Gilster

in Tools

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You are already using QuickBooks to run your business accounting and have sales tax items. Your state sales tax agency changes the current rate of sales tax to be collected (for instance sales tax went down in the state of California effective 7/1/11  see  http://www.boe.ca.gov/news/pdf/l277.pdf for details). How is this handled in QuickBooks?

  1. Add a new Sales Tax Item for the new rate. (You may have more than one.) Do NOT change the rate in the existing Sales Tax Item.  While it may look ok, it will not properly calculate your Sales Tax Liability.
  2. Make the old Sales Tax Item(s) inactive.
  3. In Preferences, change the sales tax field to the new Sales Tax Item.  (Edit, Preferences, Sales Tax)

Now any new invoices or sales receipts you create FOR NEW CUSTOMERS will use the new sales item.

EXISTING CUSTOMERS have a default sales tax item assigned to their record. Rather than going into each Customer, just change it as you enter transactions.  Follow these steps:

  1. When you create an invoice, you will get a message that you are using an inactive item. Choose “Use it once”.
  2. Enter the information in your invoice like you normally do. In the Tax field, choose the new Sales Tax Item in the drop down list.
  3. When you save the invoice, you will get a message that the information has changed, with reference to the Tax Item. Click “Yes” to save this as the default for this Customer.

If you need to see a visual of all of this, check out this post at Practical QuickBooks.

Have another QuickBooks or small business issue? Don’t hesitate to ask!

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