Collecting sales tax is a requirement for many of you, and as such, several things must be set up.
Enable Sales Tax
Select Edit - Preferences - Sales Tax preference – Company Preferences Tab - Click on “Yes” for the question “Do you charge sales tax”.
Pay attention to the full screen. Notice that the lower half of it has several options to review to make sure they are set properly for your business (how often you pay sales tax, and so forth).
Sales Tax Items
Sales tax is a charge that is added to an invoice and therefore must be on the item list.
You will create one or more sales tax items in the item list. You can do this by clicking on the add sales tax item button in the preferences screen, or by adding an item to the item list in the normal way.
Enter the percentage for the sales tax, and a vendor for whom you pay that sales tax. This is typically the state sales tax agency.
So what do you do if you have multiple jurisdictions? You could have a situation where you have a state tax, a county tax, a city tax or even more. When you file your reports to the state tax agency you need to split out the amounts by jurisdiction, usually.
To manage this, create a sales tax item for each jurisdiction. One for the state, one for each county you work with, one for each city. However you need to break it down for your reporting.
Then, create a sales tax group item and add each of the jurisdiction taxes:
For example – Sales Tax Group for Philadelphia/PA: PA State Sales Tax – 6%; Philadelphia City Sales Tax – 2%
When you use this sales tax group in an invoice the rate will be 8.0%, but the program will report each tax separately.
It is important to note that if you have a large number of taxable jurisdictions it can become very complex. You need to have a sales tax item for each jurisdiction, and a sales tax group for each “nexus” or location that has different combinations. There are third party add-on products that help with sales tax tracking which may be helpful for you, especially if you have a large number of invoices to process.