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Sales Tax
Chapter 4
Objectives
•
•
•
•
•
•
Activate and Set Sales Tax Preferences
Use Sales Tax Items on Sales Forms
Set up Sales Tax Items
Use Sales Tax Codes on Sales Forms
Set up Sales Tax Codes
Assign Sales Tax Codes to Items
PAGE REF # 99
CHAPTER 4: Sales Tax
SLIDE # 2
2
Objectives (Contd.)
• Assign Sales Tax Codes to Customers
• Use QuickBooks reports to assist in
preparing your sales tax return
• Adjust Sales Tax Payable
• Pay Sales Tax
• Set up and use Sales Tax Groups
• Categorize Revenue by Sales Tax Code
PAGE REF # 99
CHAPTER 4: Sales Tax
SLIDE # 3
3
Activating Sales Tax and Setting
Preferences
• You must set up your Sales Tax
Preferences before using the Sales Tax
feature in QuickBooks
• Select the Edit menu and then select
Preferences
• Scroll to and select Sales Tax and then
click the Company Preferences tab
PAGE REF # 100
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SLIDE # 4
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Using Sales Tax Items on Sales
Forms
• The Sales Tax Item calculates the tax for
the sale
• On sales forms, Sales Tax is calculated at
the bottom of the form, separately from the
rest of the Items on the form
PAGE REF # 103
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SLIDE # 5
5
Setting Up Sales Tax Items
• Select the Lists menu and then select
Item List
• To add a new Item, select the Item menu
at the bottom of the Item list and then
select New
• Select Sales Tax Item in the Type dropdown list and press TAB
• Enter the Tax Name, Description, Tax
Rate, and Tax Agency
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SLIDE # 6
6
Sales Tax Codes
• Sales Tax Codes are an additional classification
for calculating and reporting sales tax
• A Sales Tax Code is assigned to each product or
service item, as well as to each customer.
• Sales Tax Codes serve two purposes
– First, Sales Tax Codes indicate whether a specific
product or service is taxable or non-taxable
– Second, Sales Tax Codes categorize revenue based
on the reason you charged or didn’t charge sales tax.
PAGE REF # 105
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Using Sales Tax Codes on Sales
Forms
• If you use a taxable Sales Tax Code in the Customer Tax
Code field on sales forms, QuickBooks will charge sales
tax
• If you use a non-taxable Sales Tax Code, QuickBooks
will not charge sales tax unless you override the sales
tax code (to a taxable code) on one of the lines in the
body of the form
• When you set up a customer record, the Sales Tax Code
you enter in the customer record becomes the default in
the Customer Tax Code field on sales forms
• Similarly, when you set up Items, the Sales Tax Code
you enter in the Item record becomes the default Tax
Code in the body of sales forms
PAGE REF # 106
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SLIDE # 8
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Setting up Sales Tax Codes
• To set up a Sales Tax Code
– From the Lists menu select Sales Tax Code
List
– Select New from the Sales Tax Code menu at
the bottom of the list
– Enter three character Sales Tax code and
description
– Each Sales Tax Code has a taxable or nontaxable status
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SLIDE # 9
9
Assigning Sales Tax Codes to
Items
• When you set up Items, the Sales Tax Code you
enter in the Item record becomes the default Tax
Code in the body of sales forms
• To assign a default Sales Tax Code to an Item,
follow these steps:
– Select the Reports menu, select List, and then select
Item Listing
– Click Modify Report and remove all columns except
Item, Description, Type, and Sales Tax Code
– Double click items to edit the Sales Tax Code on each
Item
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Assigning Sales Tax Codes to
Customers
• For a customer, the Sales Tax Code entered in
the Additional Information tab becomes the
default in the Customer Tax Code field on sales
forms
• To assign Sales Tax Codes:
– Select the Reports menu, then select List, and then
select Customer Contact List
– Click Modify Report, and select Sales Tax Code,
Tax item, and Resale Num
– Double click on the customer in the report to open the
customer record to edit for Sales Tax Code
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Calculating Sales Tax on Sales
Forms
• QuickBooks automatically calculates and
tracks sales tax on each sale, when you
properly set up:
– QuickBooks items
– Customers
– Sales Tax Codes
– Preferences
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The Sales Tax Liability Report
• The Sales Tax Liability report provides you
with the information you need to prepare
your sales tax return, including a
breakdown of sales and sales tax
collected by county and sales tax agency
• Select the Reports menu, then select
Vendors & Payables, and then select
Sales Tax Liability
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Recording Discounts, Penalties,
Interest and Rounding
• The amount of sales tax you owe on the sales
tax return will often not match the amount
accrued in QuickBooks due to several factors:
– Some sales tax agencies require you to round sales
tax to the nearest dollar when preparing the return
– Many sales tax agencies offer discounts for timely
filing
– Many sales tax agencies charge interest and
penalties for filing late
– Some sales tax agencies require you to round sales
tax to the nearest dollar when preparing the return
• Select the Vendors menu, then select Sales
Tax, and then select Adjust Sales Tax
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Paying Sales Tax
• After you prepare your sales tax return and
make necessary adjustments for discounts,
interest, penalties, or rounding, create a sales
tax payment for the amount you owe
• When you pay your sales tax, don’t use the
Write Checks window because the payment
won’t affect the Sales Tax Items
• From the Vendor menu, select Sales Tax, and
then select Pay Sales Tax
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Sales Tax Groups
• In many states, multiple sales taxes must
be collected and paid to separate
agencies
• Sales Tax Group Items allow you to:
– Combine multiple Sales Tax Items together so
that each city, district, county, and state tax is
tracked separately, while only the combined
rate of all the Sales Tax Items shows on sales
forms
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Categorizing Revenue Based on
Sales Tax Codes
• QuickBooks provides a breakdown of revenue
by Sales Tax Code on the Sales Tax Revenue
Summary report
• If your sales tax agency requires a detailed
breakdown of tax exempt sales, use Sales Tax
Codes to produce information you need
• To view each individual sale, double-click on any
of the amounts in the Sales Tax Revenue
Summary report:
– This will display a Transaction Detail report showing
each transaction affecting that Sales Tax Code
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SLIDE # 17
17
Chapter Review
•
•
•
•
•
•
Activate and Set Sales Tax Preferences
Use Sales Tax Items on Sales Forms
Set up Sales Tax Items
Use Sales Tax Codes on Sales Forms
Set up Sales Tax Codes
Assign Sales Tax Codes to Items
PAGE REF # 120
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SLIDE # 18
18
Chapter Review (Contd.)
• Assign Sales Tax Codes to Customers
• Use QuickBooks reports to assist in
preparing your sales tax return
• Adjust Sales Tax Payable
• Pay Sales Tax
• Set up and use Sales Tax Groups
• Categorize Revenue by Sales Tax Code
PAGE REF # 120
CHAPTER 4: Sales Tax
SLIDE # 19
19