Can You Track USE TAX in QuickBooks?

Businesses are now becoming more aware of the requirements to remit use tax on goods brought into their state when sales tax is not charged. However, QuickBooks users have found it challenging to find an effective method of tracking the amount of use tax to report and pay. The good news is QuickBooks can track use tax and you can make the payments using the “pay sales tax” feature!

Below are the simple steps you would take to track use tax in QuickBooks.  Let’s say your Michigan based business purchased office supplies on Amazon. The supplies were purchased from an out-of-state vendor for $500 and no sales tax was charged. The sales tax rate in Michigan is 6%.

1.       When you record the purchase for $500 in QuickBooks, you will post $530 to your office supplies expense account ($500 + 6% sales tax) and -$30 to your Sales Tax Payable account. In the ‘Customer:Job’ column, you will need to enter the sales tax agency vendor name.

a.       Some may vary where the use tax is posted. For example, some may create a separate use tax expense. Using the above example, $500 would be posted to your office supplies expense account, $30 would be posted to your use tax expense account, and -$30 would be posted to your sales tax payable account.

b.      Some may also wish to assign a different vendor name for the use tax, like Out of State or OOS.

c.       When you create a ‘Sales tax liability’ report, the use tax due will not appear in the ‘Tax Collected’ column but will be included in the ‘Sales Tax Payable’ column.

2.       When your remit the tax to the state, the use tax due will appear on the last line with no item in your ‘Pay Sales Tax’ screen. You will want to select that line in addition to your other sales tax line items.

3.       To retrieve a report of your use tax purchases, create a ‘Transaction Detail by Account’ report. Filter the report to show activity for the sales tax payable account only and only checks, bills, or credit card transactions. Change the date to reflect the period you want to see.

There are several reasons why your organization may be required to report and pay use tax. Please contact our office to discuss our Sales & Use Tax Analysis services.