invoice

What Is a Sales Tax Group and How Do I Create One?

Chief Mechanic · September 12, 2010 ·

A Sales Tax Group is a type of Item that is maintained on the Item List. It’s used to combine multiple Sales Tax Items (which are themselves another type of Item) into a single sales tax charge on a customer invoice.

See our article on all of the Item types supported by QuickBooks for more information.

Since QuickBooks only supports 1 sales tax code (item or group) on an invoice, a Sales Tax Group is a way to reduce the number of codes needed to invoice a customer. In turn, that reduces the chance of data entry error while at the same time calculating all required sales taxes.

Before you can set up a Sales Tax Group, make sure that you have:

Set the preference to collect and track sales taxes
Already created all of the individual Sales Tax Items that will be combined into a Sales Tax Group

With those steps completed, you can create a Sales Tax Group by completing these steps:

Open the Item List from the Lists->Item List menu selection
Click the Item button in the lower left corner of the Item List window
Select New from the menu or press the keyboard shortcut Ctrl + N
When the New Item window appears, choose Sales Tax Group from the pull down menu
Enter the Group Name and Description
Add all the single Sales Tax Items that make up the Sales Tax Group
As you add the Sales Tax Items, QuickBooks will update the Group Rate, the total tax rate for this Sales Tax Group
Click Ok to save your work

Note:

You may observe a minor display bug in early releases of QuickBooks 2009. Here’s a screenshot from QuickBooks 2009 Premier Accountant Edition R3P. Instead of displaying the Sales Tax Group as a percentage similar to a Sales Tax Item, the Sales Tax Group is displayed as a rounded decimal. In this example, the Sales Tax Group is shown as 0.08 even though it is a combination of East Bayshore and San Domingo, for a total of 0.078, or 7.8%. However, although the Sales Tax Group is displayed incorrectly, QuickBooks calculates the tax total for the Sales Tax Group correctly.

QuickBooks Premier 2009 Sales Tax Group Display Bug

Here’s a similar display from QuickBooks Premier Accountant 2008 R6P, where the Sales Tax Group is shown as a percentage accurate to 2 decimal places:

QuickBooks Premier 2008 Sales Tax Group No Display Bug

This display bug was fixed in later releases of QuickBooks 2009 and doesn’t affect QuickBooks 2010. If you’re running an old release of QuickBooks 2009, update your QuickBooks to the latest release.

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What Is a Sales Tax Code and How Should I Use One?

Chief Mechanic · September 12, 2010 ·

A sales tax code is a list item that is used to set the overall taxable or non-taxable status of both customers and items (goods or services).

You should use sales tax codes to identify a customer, such as a reseller, from which you don’t collect sales taxes, or to identify goods and services that aren’t taxable even to customers who are otherwise taxable.

Sales tax codes are maintained on the Lists->Sales Tax Codes menu. There is a secondary method to maintain sales tax codes by visiting the the Edit->Preferences menu and choosing the Company Preferences tab on the Sales Tax submenu.

Primary Method to Maintain Sales Tax Codes

QuickBooks Premier 2009 Sales Tax Code List

Secondary Method to Maintain Sales Tax Codes

QuickBooks Premier 2009 Preferences Sales Tax Codes

There are only 2 types of sales tax codes: taxable and non-taxable.

If a customer is marked with a non-taxable code, all invoices for that customer are non-taxable. If an item is marked as non-taxable, no sales taxes will be charged for that item even for a customer who otherwise pays sales taxes.

When you add or edit a customer, you can use a sales tax code to specify that customer’s overall taxable status. The sales tax code is on the Additional Info tab in the New and Edit Customer windows.

QuickBooks Premier 2009 New Customer Sales Tax Code

When an invoice is created in the Create Invoices window, the sales tax code can be entered for each line item on the invoice and for the overall invoice. These values default to the sales tax codes for the item and customer, but they can be changed for this invoice only. For example, this capability could be used to eliminate sales taxes on a single invoice for an out-of-state shipment to an otherwise taxable customer.

QuickBooks Premier 2009 Create Invoices Sales Tax Code

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How Does Quickbooks Apply a Customer Payment To an Invoice With Multiple Line Items?

Chief Mechanic · September 11, 2010 ·

QuickBooks applies a customer payment to an invoice with multiple line items by applying the proportion of the pre-tax subtotal paid to each individual line item and applying the remainder to sales tax on the invoice.

If an invoice is paid in full, this obviously results in every individual line item and the applicable sales tax marked as paid in full.

If the invoice is only partially paid, individual line items on the invoice will be partially paid in the proportion that the total payment bears to the pre-tax subtotal.

Let’s review an example using the sample data for Castle Rock Construction from QuickBooks 2009.

As of 12/4/2012, customer Teschner (an example name only) has 2 invoices outstanding: invoice # 1064 dated 10/5/2012 for $760 (the balance remaining) and invoice # 1085 dated 11/28/2012 for $8305.95. On 12/5/2012, Teschner makes a payment of $5000 on check # 56321. A portion of this payment, $760, is applied to the older invoice, # 1064, paying that invoice in full. That leaves $4240 (i. e., $5000 – $760) to partially pay invoice # 1085.

Invoice # 1085 contains 8 line items with a pre-tax subtotal of $7920 and sales tax of $385.95, for a total of $8305.95. To determine how QuickBooks applies the partial payment of $4240 to the line items on this invoice, compute the proportion of the payment to be applied ($4240) to the pre-tax subtotal ($7920), or 0.510477429 ($4240/$7920).

Next, multiply this ratio by the pre-tax subtotal of each line item on the invoice. The first line item has a subtotal of $600. Therefore, the amount paid on this line item is $306.28, or 0.510477429 X $600. If we continue this process for each line item on the invoice and sum the amounts paid, that total will be $4042.98. Since we started with a total of $4240 to apply to this invoice, the remainder of $197.02 (or $4240 – $4042.98) is applied to sales tax.

By creating a cash basis Custom Transaction Detail Report, we can see exactly how QuickBooks applied the payment to an invoice. We’ll use the date parameters and the Filters on the Modify Report… button to highlight the exact application of the original payment of $5000. Remember, a portion of this amount, $760, was applied to an older invoice. This appears as the second line on the report. The amounts in the debit column correspond to the exact application of the check. For invoice # 1085, the invoice with multiple line items that was partially paid with this check, the amounts in the debit column represent the payment applied to each line item on the invoice.

QuickBooks Custom Transaction Detail Report Apply Customer Payment

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What Are Sources and Targets?

Chief Mechanic · September 11, 2010 ·

Sources and targets are important concepts to understand reporting in QuickBooks and use of the Advanced Find function.

Sources and targets are terms assigned by Intuit to describe transactions.

In most instances, the source of a transaction is the summary or total of the transaction. For example, the source of a check includes the amount of the check, the payee, and the bank account from which the check was written. The target of a transaction is the distribution of the source into 1 or more other accounts. For example, a check might be used to pay expenses in 2 different General Ledger accounts, which appear on the Expenses tab below the check payee information. The targets of this check include the information on these 2 lines.

A transaction can have 1 source and 1 or more targets. In most instances, the source is equal to the sum of the targets. Forms or windows in QuickBooks determine what information will be the source and what will be the target. Your only control over what is the source or target is what you enter (subject to validation) in the appropriate area of the form. In the check example below, the top part of the check form is always the source, and the bottom part always contains the target information. However, don’t extend too far the thought that the “sources are on top of the form and targets on the bottom.” That only applies to A/R & A/P transactions.

General Journal Entries are one important exception to the discussion of sources and targets. The first line of a general Journal Entry is the source, and all other lines are targets. Depending on how one enters a general journal entry, the source may not be equal to the sum of the targets. Since you have direct control over the order of lines in a general journal entry, you do control what the source and targets are for general journal entries.

Payments, statement charges, and transfers don’t follow the model that the source is on the top of the form and targets on the bottom.

Here are the source and targets for QuickBooks transaction types:

Invoice: A/R is the source; income accounts associated with the line items are the targets
Bill: A/P is the source; expense accounts on the line items are the targets
Deposit: The Deposit To account is the source; the accounts on the line items are the targets
Payment: The Deposit To account is the source; A/R is the target

To learn the source and targets for any transaction, click the Journal button or use the keyboard shortcut Ctrl + Y. The source is the first line listed. The targets are the lines listed after the source.

QuickBooks Enterprise Solutions 10 Check

QuickBooks Enterprise Solutions 10 Check Transaction Journal

In this example, the source is the first line of the report that shows the payee and check amount. There is 1 target, the second line that contains the distribution information. We’ve added Source Name as an additional column to the standard Transaction Journal report to better illustrate sources and targets. Note that the Name field for the target is the Customer:Job name, but the Source Name is the check payee. Reports that show target information won’t show the check payee in the Name field.

That leads to confusion among QuickBooks users that aren’t familiar with sources, targets, and the type of information that appears on a report. A report that shows check information in an expense account is reporting target information. The report is not indicating that a check was written to the information shown in the Name field.

According to Intuit:

sources and targets are database concepts and have nothing to do with debits or credits
a source can be a debit or credit, just as a target can be a debit or credit
most reports display a mixture of source and target data
the Inventory Valuation Summary and Inventory Valuation Detail reports are examples of exceptions in that they display only target data

This Intuit knowledge base article offers additional information on sources and targets. When reading it, don’t forget the general journal entry exception to statements about sources and targets. Some of the statements in Intuit’s own materials don’t repeat that exception, and they’re only true with that exception noted.

Issues involving confusion about sources and targets are fairly common. To address these issues, Intuit also offers explanations of the source and target data sets, the report set, where reports get their data, and how conflicting report filters produce unexpected results.

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Why Does the To Be Printed Field Remain Checked After Printing an Invoice?

Chief Mechanic · September 11, 2010 ·

According to Intuit, this is possibly caused by a damaged invoice template.

The recommended solution is to duplicate the damaged invoice template, make it inactive, and use the duplicated template in the future.

Here are the steps to resolve this problem:

Identify the invoice template used on the invoice whose To be printed flag didn’t properly reset after printing
Open the Templates window by clicking on the Lists->Templates menu selection
Select the damaged invoice template and click the Templates button at the bottom left corner of the Templates window
Click Duplicate to make a copy of the damaged invoice template
Optionally rename the copy to a new unique name by right clicking on the template, choosing Edit Template on the context menu, and clicking the Manage Templates… button
Right click on the damaged invoice template and choose Make Template Inactive from the context menu
Return to the invoice whose To be printed flag didn’t properly reset after printing
Change the Template in the upper right corner to the new copy of the damaged template
Print the invoice and confirm the To be printed flag reset properly

The screenshot below highlights the To be printed flag and the Template on the QuickBooks Create Invoices window:

QuickBooks Enterprise Solutions 10 Invoice Show Template

See our related article on clearing the To be printed flag under normal circumstances.

This problem is also discussed in an Intuit knowledge base article.

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invoice

Accounting

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Intuit