 QuickBooks Online 2023, pay sales tax. Get ready to start moving on up with QuickBooks Online 2023. Here we are in our get great guitars practice file. We started up in a prior presentation using the 30 day free trial. We also have open the free QuickBooks Online sample company. If you want the two open at the same time, we suggest using Incognito or another browser. You can open Incognito window if using Google Chrome by selecting the three dots in the browser, selecting Incognito, then typing on the search engine, QuickBooks Online Test Drive. We're using the sample company to compare the accounting view, the one get great guitars is in, and the business view, the one the sample company is in. If you want to change between the two, you can hit the cog up top and change the view down below. We're going to duplicate some tabs to put reports in like we do. Support accounting instruction by clicking the link below, giving you a free month membership to all of the content on our website, broken out by category, further broken out by course. Each course then organized in a logical, reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files, and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. Every time, right-click on the tab up top to duplicate it. Right-click on the tab up top to duplicate it. Back to the tab in the middle, go into the reports on the left, opening up one of the faves, that being the balance sheet report, it's thinking, by the way, on the business view over here, the reports are located in the business overview section, and then the reports going back on over. We're going to open up the reports, balance sheet report, tab to the right, and open up the reports this time, the P to the L, the profit and the loss, the two faves. Close up the ham to the buggy and change that range from 010123 to 022823, and then I'm going to go to the month-by-month setup so I can run it to refresh it and see Jan Feb and the tote. Then I'm going to go to the tab to the left and we're going to close up the buggy and change the range from 010123 to 022823 and run that. That's the setup process that we do every time. We're looking at the sales tax now, paying off the sales tax. Let's just give a quick recap of the sales tax. So if I scroll down here, we've got this liability account, which is in our case, California Department of Tax because that's the department. They set up the sales tax kind of by department, which is unusual. Usually you don't make an account by who you're paying, like the vendor in essence. But it kind of makes sense if you have multiple sales tax to kind of help you to distinguish between the people that you have to pay if you have to pay different departments. But basically it's sales tax payable. So note that in the United States, we have sales tax as a state tax. So there's kind of three things you want to keep in mind that we set up in a prior presentation to get the sales tax up and running. One, set up the sales tax in QuickBooks. Two, set up your items so that when you make the sales using those invoices and sales receipts, it will calculate the sales tax. And then three, you've got the customers that you want to be able to set up to see if there's any kind of overriding factor for a customer that might be not subject to sales tax. Quick recap on that. Go into the tab to the left. We went down to the taxes to set up our sales tax. We've got our tabs up top. There's our sales tax that has been set up. We basically made California our sales tax item because we based our practice problem on a location in Beverly Hills. But we also made like a generic sales tax of 5% here for the generic problem purposes. Once sales tax had been set up and we have a location that it can be used to apply the sales tax, we then set up our items, which are the things that we sell. And those are going to be in the sales tab on the left and then the products and the services. I said that like I didn't know, like I wasn't unsure, but I'm told, but I am sure that's where they are for sure. And the sample company, they're in the get paid and paid area and then product and services in the get paid section. And then we went in here and we set up our items, the inventory items for us. We're going to be the ones that are subject to the tax and then the non inventory or service items. We said we're not subject to tax. If I was to edit one of these, for example, you could see the tax being applied down here. And you can see it checked off right there as a taxable item. And then we went or we could consider going to the customers themselves. And we could say, okay, customers are in the sales tab and then customers. And if we had a customer, which would have been subject to sales tax, but is not then subject to sales tax for whatever reason, as you set up the customers, you can kind of set up that overriding kind of component. So if I go into Anderson, for example, and edit, and then we scroll down to the sales tax stuff, which is down here, taxes, we can say this customer is tax exempt. If they were tax exempt, that would mean that even though the inventory item is the main driving factor to say whether or not sales taxes applied, we can call them exempt and we can also change the location of the sales tax here so that the proper location will be applied to the proper customer. Okay, so that's the general idea. Now, as we set up the sales tax, the next question is, well, how are we going to pay the sales tax? How is this going to work? Because when we make an invoice, the taxes basically applied and we're charging the customer for the taxes, but we have to pay the tax to the government. So let's actually look at an invoice. I'm going to open up an invoice. Let's see. Let's look at the sales receipt here. Check that one out. And this one sold inventory on this one, so it's subject to the taxes. So just with regards to the tax side of things, what happened here? Well, we charged $2,094 total and then we had to tack on the sales tax, which we said was a generic 5%, bringing the total up that we're going to charge the customer, $2,198.70. Now, with the sales tax, remember that that's not going to be included, this $104.70 in income. Income is only going to be the $2,094. We're going to collect $2,198, which is going to increase the checking account or the payments to deposit in this case. The difference is going to go to a payable account. And the idea there is you can imagine a situation where it increases like the sales account. You can imagine a situation where we charge this $2,198, and we charge it to a sales account. And then when I pay the sales tax, I record an expense, which will net out on the income statement. But we don't do that in theory because we want to say, no, we're not charging you this amount. We're just the tax collector. It's not hitting the income statement. We're just the tax collector. So we collected $104 because the government's charging you the taxes customer, and we are just collecting it, and then we have to pay to the government. So neither the income nor the expense is going to hit the income statement. And then logistically, we have to say, OK, well, how am I going to pay the government? How often do I have to pay them? Do I have to pay them every time I make a sale and then pay the government on each transaction? That would be burdensome. So normally it'll be dependent on your locale in terms of how often you have to pay them. And so it's going to be dependent on your location. But the general idea would be, I'm going to collect sales tax for some period of time. If it was monthly, then for the month of January, for example, which is going to be our practice problem, I'm going to collect sales tax through the month of January. And maybe I have until the end of February in order to pay the sales tax I collected in January to pay it in February. Or if it was on a quarterly basis, possibly I collect sales tax for the whole first quarter of January, February, March. And I have until the first month of April, the first month of the following quarter to pay the sales tax. Or possibly you're on a yearly basis where I can collect the sales tax for the entire year and then pay it by the following January of the following year. That will typically be dependent upon, those different schedules will be dependent upon where you're located and how much income you make. If you make more income, you would expect whoever's taxing you, whichever state and locale is taxing you, will want you to pay them sooner is the general idea. So we're just going to do it on a monthly basis here on terms of the sales tax. So if I go into this, then I'm going to say we've been collecting sales tax this whole time and January and February. And if I go down to the end of February, down to here, then that's the total where we stand as of the end. That's the 2003, 43, 85. That's what we should owe now. And then all the stuff that we collected in February, we're going to have to owe by the end of March. It's going to be the system we're going to set up for the practice problem purposes. So now we need to make a payment. So I got to make that payment. So how can, and just know if there's other reports we can do for the sales tax. So if I go to the tab to the right, right click and duplicate the tab. And then I go down to the reports on the left hand side and I go then to, I could type in like sales tax. So taxable sales. So you got the taxable sales summary and taxable sales detail sales tax liability reports are your general reports. If I look at the sales tax liability reports and I run it for 010123 to 013123 running that report. This is, this is what we owe at this point in time. So gross total, the tax amount is the 2003, 43, 85. If I go to the first tab and I go back into my sales tax and I go down to the end of January, we've got the 2003, 43, 85, right? So that's going to be 2003, 43, 85. So it's kind of, it's helping us to link out what we, what we owe at this point in time. And now we got to write a check for that basically, or have an expense form, an electronic transfer form. But usually we would do that with the internal system that has been set up. And so we'll have another special check form. If I look at like our flow chart, what's happening here is we entered like an invoice or sales receipt. Those are the forms that increase the sales tax. And then, and then we're going to pay the sales tax. And usually we'd use like a special check form. Here they have it as a managed sales tax, which creates the check forms, which are going to be giving or showing in the system as a special check form. Typically similar to like a pay bills form is a special check type of form. It decreases the checking account or a payroll liability form that shows up as a check type form, but is indicating that it's a payroll check form. That's what we would normally do. We might not be able to do it in the practice problem because we're not working real time. Let me show you what I mean. If I go down to the taxes, then normally it would tell us, you know, California deposit, the amount that's going to be due. And I can basically generate the check from here. So for example, you can see down here, if I hit the more details, it gives you the more information, the taxable assets, the non taxable sales, the gross sales, which can help you to actually generate the reports that might be necessary for the reporting down below. You've got the status of all pay due, overdue or open and the information detailed down below. And then the tax period. Now, if I go into this item down here, I can view the tax return information. Note that when you're dealing with the sales tax, it's similar to be dealing with like when you're filing the form 1040 for an individual taxes, which in theory, if it was a perfect world, if it wasn't so complex, then you could just pay the taxes as the year goes. And the 1040 would just be an informational return, just basically verifying that you've already paid the proper amount of taxes. You wouldn't have any refund or any amount due at that point in time. But the income taxes is way too complex with the progressive taxes to mean everything with the sales tax. Whenever you populate the tax return, it should be an informational thing. And again, it'll be dependent upon that your location and who's charging you basically the sales tax. But you would think it would be a summary type of form saying, hey, look, these are the sales that were subject to sales tax. Here's how much I paid based on the rate. Here's how much I already paid you. And hopefully everything has already been paid. And it's an informational type of form that possibly you can get the information or help to file with the use of the sales tax information here. You can add an adjustment down below if there's an adjustment that is necessary. Now note, for us, because this is designed to run real time, then it's a little bit difficult for us to use these reports in active time. That's one of the problems with working a practice problem. So if you're working out into the future on this, then you might not have the same information in terms of generating the reports and whatnot. So like, for example, right now it happens to be the end of January. So if I hit the dropdown and I say I want to look at last month, then it gives us this information and overdue down below based on my current. And if I view this, then it gives us our information. There's the froze. So there it is. Then you get that then once you pay the taxes, however you go through the payment process. Then you can record, you know, the payment here. You can also try to automate the payment. If you have if you use in QuickBooks for your payment processes, but you can basically record the payment within the system so that everything ties out. And then you would in essence record a check type of form that would have a special tick mark on it to indicate that it's a special check for paying off the sales tax. You can also explore the auto save the sales tax with a QuickBooks checking account, explore QuickBooks checking. And but then again, you're dealing with a QuickBooks checking kind of thing, which is a which is like an up sale type of thing, which may or may not be useful. We might get into that in more detail in future presentations. But for the practice problem, because we can't because we're we can't really work at real time, we have to just basically make a check type of form. So you wouldn't really want to do that in practice. You would want to use the little widget down here. If you're using the whole sales tax setup, which should work nicely if you were running the practice problem in real time. But we're going to actually generate a check to record the transaction in our practice problem. So let's go up top. I'll just hit the plus button. And I might make two checks to tie out to our practice problem bank reconciliation because oftentimes when you pay sales tax, it'll be like a state tax and then the city tax that you might have to pay. So I'm going to break that out because that's how our bank reconciliation is city tax. I'm just going to say California. I'm just making up the the the vendor here to make it somewhat generic that we are paying the sales tax. This being, you know, the government that we're paying whoever's whoever's saying, hey, you got to give us protection money. This is how much you owe. So then down below, I'm just going to say this is going to go to that category, the sales tax category, which was the California Department of Tax and Fees. And I'm going to make one payment for the 1875.09. Where did I come up with that number? I came up with that number because I'm trying to tie out to my practice problem on the bank rec. So the sum of the two transactions that I make will tie out to our liability form that we generated over here, which is which is not pulling up, but I'll go back to there in a second. And so there we have it. Okay, I fixed it now. So there it is. So that's that. And so now let's say save and new because I'm going to make another check save and new. And I'm going to be I'm going to say this is now the state. So I'm going to say this is going to the state sales tax California. I'm just making up a vendor here that we're going to pay there. So that's that. Boom. Bam. Shaka Laka. And so the check number populates. And this is going to go once again to the California board, California department and so on and whatever. So then I'm going to say this one is for 468.77. And I think the two of those checks should add up to this 234385, which we'll check out in a second. So let's save and close that and see if that does indeed do what we expect. So if I go back to the tab to the right and I go into my balance sheet and we've run it. Then I can see the checking account should go down by those two checks. Clearly that should be something that happens. So if I go down, I've got all this stuff happening on the 28th. So it's kind of hard to see. But the ones that I just made were here and the other one was there. So those two are in there. That looks good. Now note they're in there as normal checks. They check the widget thing to make them. If I could do that, then it would show up kind of like a special check, kind of like a bill payment check or a payroll check. Right? It'll give you that extra little special thing that tells you that, which would be good. You want to use that if you're using the whole system within QuickBooks, but we can't do it real time as we explained. So I won't go into it in any detail here. So then if I look at the California department of blah, blah, blah, and I go into that. Then we can see once again that at the end of January, the end of January, we had the amount that we owed of two, three, four, three, 85. And then we paid these two checks at the end of February. And if I pull up the trustee calculator to calculate those two checks. Then it'll be four, six, eight point seven, seven plus one, eight, seven, five point oh nine. And there's that two, three, two, three, four, three, 86. That's paid off. So this amount, the five, five, three, 69 is what is, is, is what is still do and we're going to have to pay. That's what we collected in February that we're going to have to pay at the end of March is the way we're setting up our system here in the practice problem. So if I go to the tab to the right, notice that the payment that we made ties out here to the liability. And if I, if I run this report for March, 020123 to 022823, run it, then we've got the 55370. That's what's going to be due in March. So, so this is what we collected in February that's going to be due in March. Now note another thing that people often get confused. It's confusing until you understand it. You're going to say, well, hey, I paid, I paid these taxes. They should be an expense on my income statement. That's, that was a lot of money. I should be able to deduct it on my income statement. Why isn't it here? We explained it before, but it's still a little bit confusing. And it's because neither the income when you collected the sales tax nor the expense when you pay the sales tax is on the income statement. You can imagine a system where they did that where you've recorded the income and then the expense of doing business. But then the implication would be that the expense was your expense. It's a business expense, but it's not in theory a business expense. You're just the tool of the government. You're just a collector. It's not your income. It's not your expense. When we collect it, we're supposed to put it on the balance sheet because in theory it's a tax applied directly to the client, you know, or the customer, right? Not to you. You're just the middle. You're just a collection person. Therefore, the accounts payable goes up with the sales receipt or the invoice. And then it goes down when you make the payment, neither income or expense hits the income statement. So that's the, that's the general idea. Let's open up a trial balance to see where we stand now. I'm going to go back on over to the tab to the right, go to the reports on the left, close up the boogie and type in trial balance, because that's what I'm looking for. Anytime I'm looking for something in the search engine, I try to type the name of the thing. I want 0123 to 022823. Let's take away 022823. Let's look at this on a month by month and run it. So if you have what I have, then we're, we both have the same stuff, which is good. If you don't try changing the range, it's often a date range in you. We're going to be doing a transaction detail report at the end of the second month of data input to further drill down on any differences.