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Automatic Sales Tax Calculations in QuickBooks

QuickBooks can calculate the correct sales tax rate for you automatically, based on the item and location on your invoice. Keeping this setting on prevents overcharging or undercharging your client's sales tax.

When it's time to file sales tax, the amount owed is calculated using the correct rate, not the rate actually charged on the invoice. If you manually selected a lower rate than required, the shortfall doesn't go away. As the business owner, you're responsible for covering the difference.

 

Steps
  1. Open a new invoice in QuickBooks.
  2. Add the item or service you're invoicing for.
  3. Confirm the item is marked as taxable.
  4. Look for the sales tax section on the invoice and confirm Automatic Calculation is selected, not a manually chosen rate.
  5. Review the calculated tax amount before sending.

Automatic Calculation should be selected by default on new invoices.

When to Double Check

A manually entered rate can carry over without you noticing in these situations:

  • Copying an old invoice. The original rate carries over.
  • Using a saved template. Templates can hold an outdated rate.

In both cases, confirm Automatic Calculation is selected before sending.

Need Help?

If you have questions about an invoice or your sales tax setup, contact us. We're happy to make sure everything is calculating correctly.