Common Error in QBO - Sales Tax Payable

QuickBooks can be tricky when it comes to paying liabilities. One of the most common errors we see is incorrect balance in the Sales Tax Payable account. The other side to that error is a Sales Tax Expense account.

The reason this is not correct is because sales tax, is simply a tax you collect from your client and then turn around and remit to the Texas State Comptroller. There are rare exceptions to when we would see a sales tax expense. If you under-collected from a customer, then remitted the correct amount to the Comptroller, then I would expect to see that as a true out of pocket expense and therefore reflected on your profit and loss.

What about the discount for timely filing and paying? Well, that’s income. Why? It represents an amount you collected from your customer and did not remit to the State Comptroller, so that was additional revenue you got to keep. It’s normally a small amount, however you must enter that into your QuickBooks file, otherwise the payable will never match up with the activity posted through the Comptrollers website.

To enter this adjustment go into your Taxes section on the ribbon menu. Click on the respective return you are paying on the Comptroller’s Website. It will bring up the Sale Tax Return in QuickBooks Online. There is a “+” sign with a link that says “+ Add an Adjustment”. Click on that link and enter the respective early filing discount. After you enter the relevant details, your sales tax report in QBO should match the Comptroller’s report to the penny. Go ahead and enter payment details and close out.

If you are struggling to resolve a balance and need help, reach out. We can help you get your sales tax back on track and make sure you are in compliance.