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How to Assign Sales Tax Codes in QuickBooks QuickTip

Assigning New Sales Tax Codes in QuickBooks

QuickBooks uses sales tax codes to track the taxable or non-taxable status of the products and services that you sell, and of your customers. QuickBooks starts with two sales tax codes—Tax (which means liable for sales tax) and Non (which means not liable for sales tax). For many businesses that’s enough. But in some cases those two tax codes aren’t enough, because some taxing authorities want more information—such as why a customer isn’t liable for sales tax; is a customer nontaxable because it’s out of state and the rules say you don’t have to collect taxes for out-of-state sales, or is the customer nontaxable because it’s a nonprofit organization, or a government agency? If your state requires this information, you must create tax codes to match the reporting needs required by your state. For example, you could create an NPO code for nonprofit organizations, or a GOV code for government agencies that don’t pay tax. To assign sales tax codes for sales tax in QuickBooks:

  1. Choose Edit | Preferences from the QuickBooks menu bar.
  2. Click the Sales Tax icon on the left pane and click the Company Preferences tab.
  3. In the Assign Sales Tax Codes section in the middle of the page, click on the Taxable Item Code drop-down list and select <Add New> to open the New Sales Tax Code dialog.
  4. Enter the name of the new code, using up to three characters.
  5. Add a description to make it easier to interpret the code.
  6. Select Taxable if you are entering a code to track taxable sales or select Non-taxable if you’re entering a code to trace nontaxable sales.
  7. Click OK to save this code.

 

 

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