Entering a Sales Tax Increase in QuickBooks

Your sales tax increased as of 7/1/2011.  How do you enter this change into QuickBooks?

The easiest way is to go to List, Item List, find the sales tax item and edit it to make the change.  This will not affect the invoices that are already created, just the new ones going forward:

Below is a picture of your final sales tax liability at the old rate for the prior quarter.

In my opinion, the best way to record this change is for you to create a new sales tax item for the increased tax.  This will make more data entry for you, but in the long run, it will give you better record keeping. Once you have created the new sales tax item,  edit the old one with an end date. (thanks Rustler for this tip!)

Go to list, item list, highlight the sales tax item and right-click, edit it.

Here I re-name the old sales tax item with the last date of this particular tax rate, then make it inactive.

After I have created the new .4% tax rate, I make sure I go to edit, preferences, sales tax and make it my default sales tax item.

  

It is definitely more work doing it this way. What I have done in the past is I would just change the customer preference with each new invoice that I enter.  When I select a customer that has the old, inactive rate, QuickBooks will warn me that this customer has an inactive sales tax rate, which will remind me to change and update the customer to the new on on the invoice. QuickBooks will then ask me if I want to save this new rate for my customer and I say "yes".

It is especially important to create the new sales tax item if the rate changed for you mid quarter. You will need the reporting on your sales tax liability report to show both rates so that you can properly prepare the sales tax return.

Courtesy of our colleague Lynda Artesani, Certified QuickBooks ProAdvisor in SW Florida