Understanding sales tax accounts

Sales Tax is a liability account used to track the sales tax you collect from customers that must be paid to a tax agency (e.g., state or local government). A liability account records money your business owes to others. Sales tax is considered a short-term liability because it is typically due within a short period, such as a month or a quarter. This account helps you monitor and ensure compliance with tax requirements.

This topic explains how sales tax accounts are created, how to manage tax rates and agencies, and how to use the Sales Tax register.

A sales tax account is automatically created under the following conditions:

The first time you create an invoice for a business that includes sales tax.
A separate sales tax account is created for each business with sales tax, and the account name is appended with the business name.

Note: Sales tax accounts cannot be created using the standard add account process.

Managing sales tax rates

You can create sales tax rates in two ways:

From an invoice: Use the Tax Rate field on the invoice form to create a new tax rate.
Select Window menu → Sales Tax.
Select the Rates tab to add, edit, or delete tax rates.

Managing sales tax agencies

Sales tax agencies represent organizations responsible for collecting sales tax. You can create agencies in two ways:

When creating a sales tax rate: Add an agency directly in the sales tax rate form.
Select Window menu → Sales Tax.
Select the Agencies tab to manage your agencies.

Using the Sales Tax register

The Sales Tax register allows you to track and manage sales tax transactions for your business. While dedicated only to sales tax payments from invoices, it otherwise works like a standard register. Use it to:

Enter Tax Payment: Record a payment for sales tax owed to a business and agency.
Review and edit transactions: Add, view, edit, or delete transactions.
Access Invoices that have a sales tax transaction.

Note: You cannot assign sales tax without an existing invoice.