sales tax item

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

Chief Mechanic · September 12, 2010 ·

A sales tax item is a special type of Item, the list of goods and services that you sell. It is used to specify the sales tax rate and the tax authority collecting it that will be charged on each invoice.

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

Sales tax items can be grouped into another special type of item, a sales tax group, to combine multiple sales tax items on a single invoice.

You should create 1 sales tax item for each tax authority for which you collect tax.

Sales tax items are maintained on the Lists->Items menu. There is a secondary method to maintain sales tax items by visiting the Edit->Preferences menu and choosing the Add sales tax item… button on the Company Preferences tab of the Sales Tax submenu.

Primary Method to Maintain Sales Tax Items

Secondary Method to Maintain Sales Tax Items

QuickBooks Premier 2009 Preferences Sales Tax Items

You can specify the default sales tax item for new customers in the Preferences window. To do so, use the pull down on the Your most common sales tax item selection.

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

QuickBooks Premier 2009 New Customer Sales Tax Item

When an invoice is created in the Create Invoices window, the sales tax item can be entered for the overall invoice. This value defaults to the sales tax item for that customer, but it can be changed for this invoice only. For example, this capability could be used to apply a different tax rate on a single invoice for a shipment to a location different from the normal location of a taxable customer.

QuickBooks Premier 2009 Create Invoices Sales Tax Item

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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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How Do I Collect and Track Sales Tax?

Chief Mechanic · September 12, 2010 ·

The first step to collect and track sales tax in QuickBooks is to enable the preference to do so.

On the Edit->Preferences menu, select the Company Preferences tab on the Sales Tax submenu.

Click Yes on the Do you charge sales tax? preference.

QuickBooks Enterprise Solutions 10 Preferences Sales Tax

Once the preference is set, you use:

sales tax codes to specify whether a customer or item is or is not taxable
sales tax items to specify the sales tax applicable to a customer or invoice
sales tax groups to combine multiple sales tax items into a combined rate for a customer or invoice

To collect and track sales tax, you’ll need to create at least 1 sales tax item, which you can do directly from the Preferences window.

If you are changing your sales tax preference after you’ve already created customers, inventory, or non-inventory parts, you’ll be given the opportunity to change the tax status of those existing customers and items. When the Updating Sales Tax window appears, choose what you’d like to update and click Ok.

QuickBooks Premier 2009 Updating Sales Tax

This update process will update all customers and all items that are either an inventory part or non-inventory part, so make your decision to update carefully. Decide based on the characteristics for the bulk of your customers or inventory items, because the exceptions will have to be reviewed and changed individually.

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What Is an Inventory Assembly Item?

Chief Mechanic · August 23, 2010 ·

In QuickBooks an inventory assembly item is a specific type of Item that is the result of putting together a new inventory part out of a bundle of individual items to enable tracking finished goods separately from individual components. Normally, an inventory assembly item is used when separate raw materials are assembled, packaged, and sold as an inventory item that is separate from the component parts.

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

The inventory assembly item type is only available in QuickBooks Premier and Enterprise Solutions. It’s not available in QuickBooks Pro.

It is similar to – but different from – a group item, another approach to managing a bundle of individual items. A group item is a way to quickly add a bundle of items to a form while preserving the ability to track those items individually. Where an inventory assembly item functions like a pre-assembled kit, a group item functions like an “on the fly” kit.

An inventory assembly item is made up of a Bill of Materials (visible by clicking the Full View… button) which can contain a range of item types: service, inventory part, another inventory assembly, non-inventory part, and other charge. Note that a subassembly can be nested within an inventory assembly. However, the Bill of Materials cannot contain these item types: subtotal, group, discount, payment, sales tax item, or sales tax group. Further, there’s a limit of 100 items in the Bill of Materials for an inventory assembly in QuickBooks Premier; for Enterprise Solutions, that limit is 500 items.

QuickBooks Premier 2009 Bill of Materials Full View

The Cost shown for an inventory assembly item should normally not be entered. When a Cost is not entered, QuickBooks will use the Bill of Materials Cost that appears at the bottom of the table.

An inventory assembly is built from its components parts by clicking on the Vendors->Inventory Activities->Build Assemblies menu selection. During the build process, the Quantity on Hand of the inventory assembly item is increased by the Quantity to Build, and the Quantity on Hand of each component is reduced by the product of that item’s Qty in the Bill of Materials and the Quantity to Build.

Builds in QuickBooks can be either pending or final. If there are insufficient quantities of the component parts, a build will automatically be marked as Pending. You can also manually mark a build as pending by clicking on the Edit->Mark Build As Pending menu selection while the Build Assemblies window is displayed. The Pending Builds report (Reports->Inventory->Pending Builds) supports managing future build requirements.

Here’s an example of invoicing for the inventory assembly item Interior Door kit shown above. Unlike a group item, which automatically adds other items to a form and controls whether these other items are printed, the inventory assembly item appears as a single line item on a form.

QuickBooks Premier 2009 Create Invoices Inventory Assembly Item

The price of an inventory assembly item is specified, just like the price of an inventory item, and can be changed directly on a form.

Sales tax for an inventory assembly item is calculated based on the single Tax Code assigned to the inventory assembly.

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What Item Types Does QuickBooks Support?

Chief Mechanic · August 23, 2010 ·

QuickBooks supports 11 Item Types.

Items themselves are maintained on the Lists->Item List menu selection, but the Item Types are pre-configured in QuickBooks and can’t be maintained by a user.

QuickBooks Enterprise Solutions 10 New Item

The 11 Item Types are:

Service
Inventory Part
Inventory Assembly
Non-inventory Part
Other Charge
Subtotal
Group
Discount
Payment
Sales Tax Item
Sales Tax Group

There is a 12th Item Type, Fixed Asset, which is maintained on the Lists->Fixed Asset Item List menu selection.

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sales tax item

Accounting

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