Sales Tax FAQs

Sales Tax Overview | Configuring Sales Tax | Sales Tax Reports

The following lists include common questions about collecting sales taxes in Point of Sale. Click on a question or scroll down to view the answers.

How do I collect sales tax based on unit price thresholds?

Due to a recent tax law change, when selling an item above a specified unit price I need to collect one combined tax rate for two agencies, but if the unit price is below the threshold I only collect tax for one of the agencies. How do I handle this in Point of Sale?

How do I collect a different tax rate on certain "luxury" items

I often take coupons or provide discounts which are reimbursed to me later by a third-party. I am required to collect tax on the full item price, prior to the coupon or discount being applied. How can I do this?

My city requires me to collect of 1% tax on top of the state sales tax charged. How do I set this up and get proper tax reporting?

I didn't need a particular tax code in my second tax location, because all sales using that location are non-taxable. However, when I deleted the code from the second location, it was also deleted from my default location ( where I do need it to collect sales tax). Why?

How do I collect tax on shipping amounts?

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I am required to collect 8.0 % sales tax on certain items, but only if the unit price of the item exceeds a set amount, and then the tax applies only to the amount above that price. How do I handle this?

Set up a separate tax code in company preferences for this purpose. Select the Price-dependent single-rate tax option when defining the tax code . Enter the unit price threshold (the amount above which tax is collected), and then also select the check box to A pply sales tax only to the amount over the unit price threshold.

After setting up the tax code, assign it to the items in inventory that are taxed this way.

Point of Sale will automatically apply sales tax to the items associated with this code when they are listed on a sales receipt.

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Sales tax overview

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Due to a recent tax law change, when selling an item above a set unit price I need to collect one combined tax rate for two agencies, but if the unit price is below the threshold I only collect tax for one of the agencies. How do I handle this in Point of Sale?

This is best handled by setting up a multi-rate tax code. Set up one component of the tax code for each different rate/price range/agency combination needed, up to three components per tax code.

Click here to learn more about multi-rate tax codes and to view some examples of their use.

After setting up the tax code, assign it to the items in inventory that are taxed this way.

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I am required to collect a tax rate higher than my normal sales tax on certain "luxury" items. How do I handle this?

Set up a separate tax code and assign it to the luxury items in inventory. When defining the taxing instructions, enter the higher tax rate. Point of Sale will automatically apply the higher sales tax rate to the items associated with this code when they are listed on a sales receipt.

Example: Most of your taxable items are assigned the tax code "Tax" with a 7.0% tax rate. However, the luxury items you sell must be taxed at 8.5%. Add a tax code named "Luxury" or similar, enter the 8.5% tax rate, and optionally define a different tax code "mark" for this code to print on the customers receipt, such as an "L". Then assign the new tax code to the appropriate items in inventory.

If the tax only applies to the portion of the item price exceeding a defined threshold, you can use the price-dependent option when defining the tax code.

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Using sales tax codes

Sales tax overview

I often take coupons or provide discounts which are reimbursed to me later by a third-party. I am required to collect tax on the full item price, prior to the coupon or discount being applied. How can I do this?

Set up a non-taxable, non-inventory item for the coupon/discount that can be listed on the sales receipt. Include identifying information in the item description so that reports can be filtered or sorted by this value and set the price as a negative amount equal to the coupon amount or discount. (Option: Enter a generic description, e.g. "Coupon" and no price and edit the item when listing on a receipt to enter the amount and identifying information).

When selling the item, list both the item being sold at its regular price and the non-inventory coupon/discount item. Tax will be applied to the full price of the sold item, but the total due from the customer will be reduced by the discount item amount.

Since you are using an inventory item to apply the discount, consider the affect on your merchandise sales reports. You may want to filter and memorize your merchandise sales reports to exclude the coupon/discount item.

Sales tax overview

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My city requires me to collect of 1% tax on top of the state sales tax charged. I need to report and pay this tax separately to the city. How do I set this up and get proper tax reporting?

When defining your tax codes, select the Multi-rate option. Enter the city and state tax rates as separate components of the code, each with their respective tax rate. (Note: Enter 0.5 % by typing 0.005 in the tax rate field). Since the tax is collected on the full price of the taxable items, do not enter any price thresholds. Assign this tax code to all taxable items in inventory and Point of Sale will collect the full combined tax rate on sales, but you'll have the ability to sort and sub-total your tax reports by agency.

Click here to learn more about using multi-rate tax codes.

Alternative: If you have integrated Point of Sale with QuickBooks financial software, you can accomplish the same reporting by setting up a tax group in QuickBooks and then mapping a single-rate Point of Sale tax code to the tax group. With this setup, the Point of Sale tax code will collect the single combined tax rate on sales, but your tax reports in QuickBooks financial software can break out the taxes due to each agency. Read Collecting sales tax for multiple agencies for more information.

Sales tax overview

Sales tax reports

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I didnt need a particular tax code in my second tax location, because all sales using that location are non-taxable. However, when I deleted the code from the second location, it was also deleted from my default location ( where I do need it to collect sales tax). Why?

Tax codes are universal across all your tax locations. Adding or deleting a tax code adds or deletes it to/from all tax locations. However, the taxing instructions for the code can be different for each location. In this case, you should add the tax code back but edit it in your second location to specify a 0% tax rate.

Also, in the second location (0% tax), you can map the tax code to a different QuickBooks tax item so it is reported properly in QuickBooks.

Using tax codes

Using tax locations

Sales tax integration with QuickBooks

Configuring sales tax

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