You can also make the adjustment gross or net of sales tax. or, you can use regular Sales Items, so the discount will be reflected in the overall profitability for those Items. However, if you use a Credit Memo or Bill Credit, you can either create a separate Item to track the discount. You also cannot designate a sales tax item, so QuickBooks will also exclude customer discounts (which are reductions in income) on sales tax reports like the Sales Tax Revenue Summary report and the Sales Tax Liability report. Since you cannot use an Item on discounts, QuickBooks will not reflect the discount on Item‐based reports like Sales by Item Summary and Job Profitability Summary/Detail. However, it is almost always best to use a Credit Memos and Bill Credits instead of Customer Discounts and Vendor Credits (respectively) for the following reasons.Ĭustomer and Vendor Discounts do not Allow You to Select an Item or Sales Tax Item. With vendors, the discounts are even more effective when you use date‐driven terms because QuickBooks will either automatically apply the discount or automatically calculate the discount, depending on the settings in your Company‐level preferences. Set up your preference for paying the sales tax (Monthly, Quarterly, Annually).Use Credit Memos & Bill Credits Rather than Customer & Vendor DiscountsĬustomer Discounts (applied on the Receive Payments window) and Vendor Discounts (applied on the Pay Bills window) are efficient ways to discount what your customers owe you and what you owe to your vendors.Take into account your company’s accounting an preference. Set the Sales tax basis (Accrual or Cash).Customers who are reselling the products they buy from you or who are using your products to create a product of their own, which they then sell. Customers who are simply reselling the goods they buy from you. Sales to government offices, which are not taxed. Such organizations are not charged sales tax, even if the products and services you sell are taxable. Some QuickBooks company files already include this non-taxable sales tax code. In many states, labor services are not taxed, so you might assign LBR to a service item. Many QuickBooks company files already include this non-taxable sales tax code.
You might assign this sales tax code to a customer who has bought your product from your company catalog, but lives in another state. Many states do not charge sales tax for out-of-state sales. Other non-taxable codes that you can use are the following: Sales tax code If you want to create a tax code specific to your business needs, select the Tax Code drop-down then choose Add New. NON is used for items and customers that are exempted from tax such as non-profit organizations, out-of state sales, or items that your customers will resell.
TAX is used for items and customers that you need to collect tax for. When you turn on sales tax in QuickBooks, two tax codes are automatically created: TAX (taxable) and NON (non-taxable). Setting up and assigning the correct sales tax code allows you to run a report that divides the total taxable and non-taxable sales. Sales tax codes help you track taxable and non-taxable sales and/or customers. If the tax item is not set up yet, select Add New, then follow the steps in creating a tax item. Enter each sales tax that you need to include in the group.Further information can be entered in the Description field.