Paying sales tax using QuickBooks can turn into a mess if you do not use the right screen to pay for sales tax.

To start, how is sales tax calculated in QuickBooks? QuickBooks can calculate the sales tax owed using the cash (when the money is received) or accrual (when the customer is invoiced) method. You can use either method with the State of North Carolina, but you have to be consistent. For example, if you started with the accrual method you have to continue to use the accrual method. If you want to switch to the cash method, you have to contact the NC Dept. of Revenue which will first audit your sales taxes paid before allowing you to switch sales tax payment methods.

In order for QuickBooks to properly calculate sales tax, you have to use either the Customers – Enter Sales Receipt screen or the Customers – Create Invoices (and later Receive Payments) screen. If you record your sales by only making a bank deposit, the sales tax will not calculate for you and the sales tax reports will not be useful to you.

When you are ready to pay your sales tax, whether you file on a monthly, quarterly, or annual basis, there is a report that you can generate to see what is due. From the main menu bar, click Reports – Vendor & Payables – Sales Tax Liability. Be careful which dates you choose because that effects how much sales tax is due. After choosing the right dates, the amount due will show up on the last column of the report with a heading such as “Sales Tax Payable as of April 30, 2011″.

Next, make sure this amount equals the following screen: click on Vendors – Sales Tax – Pay Sales Tax. Again, be careful with the dates. For example, if you are paying sales taxes owed for April, make sure the date under “Show sales tax due through” is 4/30/2011. The amount due in this screen must match the Sales Tax Payable report previously generated. When the amounts match, put a check mark next to the tax agency you want to pay and press the OK button.

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