How to Track Use Tax in QuickBooks

Written by admin on July 16, 2013

Some purchasers opt to avoid paying sales tax on certain purchases by ordering these items from vendors who are outside the state who do not charge sales tax. However, these business owners must still report use tax in QuickBooks to track where they use these items. Business owners may have resale certificates with these vendors, but these types of goods may still be taxable because they use the items for their own use. Then, the business owner must track the Use Tax in order to account for his or her payments for sales tax and his or her return. Their accounting software allows them to report the use tax in QuickBooks.

Posting the Sales Tax to QuickBooks

QuickBooks allows business owners to track purchases to obtain a report to use for their “Use Tax” that they have on their return for sales tax. This situation arises when a business makes a purchase for track use tax in QuickBooksitems that they use, instead of using them for resale. When items are purchased in this manner, they are taxable, but business owners may not make the sales tax payment when the items are purchased because they may list a certificate that may exempt them from paying taxes to the vendor or they may have purchased the item through a supplier in another state who doesn’t gather sales tax on behalf of their state.

Here is an example of tracking an item in QuickBooks for this purchase:

You purchase cleaning supplies for $200 and you did not make the sales tax purchase when you made the purchase. The sales tax rate is 5 percent. Start by recording the purchase. Place a value of $210 to the cleaning supplies expense account. Put $10 in the Sales Tax Payable column. Enter the sales tax agency in the Sales Tax Payable name column so that the Sales Tax Payable amount is increased. It will appear in the window that populates, located on a line that does not have an item listed beside the sales tax column, where you would normally see adjustments for sales tax. Once you make a payment for the state sales tax, select the items for which you need to pay sales tax and the final line that has no item listed by the sales tax item, and the additional tax will be added to the payment that is listed.

You can also make a report to locate all purchases where there was no charge for sales tax. Start by creating a report and then filtering it by the specific transaction type and the date range and the range of dates that you are looking for. The report shows every transaction where you have recorded a use tax purchase.

For additional QuickBooks tips, visit our QuickBooks How To section.