Tax only a percentage of certain items?


E

emtaylor

Right now, we charge tax on some items and don't charge tax on others
- easy.

However, we just discovered a tax law in our state that basically says
that we can collect sales tax "on only 80 percent of the amount you
bill for your information service". (Which is already one of our
taxable items.)

So, we have to charge the full tax rate, but only on 80% of the
TAXABLE part of the bill.

Example:
Item 1 $100 (non taxable)
Item 2 $100 (taxable)
** We would charge sales tax on only $80. ** UGH!!!!!!!!

I assume there is no way to do this in QB, but I thought I would ask.

FYI, we have QB 2005, but would be willing to upgrade if the feature
is available in later versions!
 
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A

Allan Martin

Right now, we charge tax on some items and don't charge tax on others
- easy.

However, we just discovered a tax law in our state that basically says
that we can collect sales tax "on only 80 percent of the amount you
bill for your information service". (Which is already one of our
taxable items.)

So, we have to charge the full tax rate, but only on 80% of the
TAXABLE part of the bill.

Example:
Item 1 $100 (non taxable)
Item 2 $100 (taxable)
** We would charge sales tax on only $80. ** UGH!!!!!!!!

I assume there is no way to do this in QB, but I thought I would ask.

FYI, we have QB 2005, but would be willing to upgrade if the feature
is available in later versions!
Without much thought on my part, why not adjust the tax rate to 80% of the
normal rate?
 
E

emtaylor

Without much thought on my part, why not adjust the tax rate to 80% of the
normal rate?
Current tax rate is 8.25.

Collecting full tax (8.25%) on $80 (as in example above) is $86.60.
(This is what we are trying to do.)

Collecting 80% of the tax rate (which would make it 6.1875%) on full
amount (100.00) comes out to $106.19.

Big difference! :)
 
V

vcardx

No, what I think you are really trying to do is come up with TAX amount of
$6.60 on your sales of $100 (since that is the only part payable to the
state - the $86.60 amount is meaningless). The amount payable by customer
is $106.60, isn't it??
Use 6.6% rate on the full taxable amount, and that will calculate the proper
amount of sales tax payable. (And that is 80% of 8.25% anyway. The 6.1875%
you quoted is only 75%...)

vcardx

: >
: > Without much thought on my part, why not adjust the tax rate to 80% of
the
: > normal rate?
: >
: Current tax rate is 8.25.
:
: Collecting full tax (8.25%) on $80 (as in example above) is $86.60.
: (This is what we are trying to do.)
:
: Collecting 80% of the tax rate (which would make it 6.1875%) on full
: amount (100.00) comes out to $106.19.
:
: Big difference! :)
:
: >
: >
:



--
 
H

HeyBub

Right now, we charge tax on some items and don't charge tax on others
- easy.

However, we just discovered a tax law in our state that basically says
that we can collect sales tax "on only 80 percent of the amount you
bill for your information service". (Which is already one of our
taxable items.)

So, we have to charge the full tax rate, but only on 80% of the
TAXABLE part of the bill.

Example:
Item 1 $100 (non taxable)
Item 2 $100 (taxable)
** We would charge sales tax on only $80. ** UGH!!!!!!!!

I assume there is no way to do this in QB, but I thought I would ask.

FYI, we have QB 2005, but would be willing to upgrade if the feature
is available in later versions!
Contact your state comptroller. You cannot be a pioneer.

The state wants it to be EASY for you to collect the tax, so there's got to
be an acceptable way. Don't forget, the sales tax is a tax on YOU, not the
customer - you're just allowed to collect a surcharge. Here's an example:
Suppose you sold something for a nickle, but you sell a LOT of them. The
state doesn't allow you to collect a tax for a five-cent purchase, but the
state certainly wants its 6.25% of your gross sales.

Sales tax collected and sales tax owed virtually never come out the same.
 
A

Allan Martin

Current tax rate is 8.25.

Collecting full tax (8.25%) on $80 (as in example above) is $86.60.
(This is what we are trying to do.)

Collecting 80% of the tax rate (which would make it 6.1875%) on full
amount (100.00) comes out to $106.19.

Big difference! :)
If you spent more time listening to the math teacher in 4th grade you would
not be posting the above. This is why our jobs are being lost to workers in
India and China.
 
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E

emtaylor

If you spent more time listening to the math teacher in 4th grade you would
not be posting the above. This is why our jobs are being lost to workers in
India and China.
You're right, but thanks for the nice message anyway. I was
confused. I actually initially thought that we were supposed to only
collect 80% of the tax and then I was told we are supposed to collect
tax on 80% of the bill. So, like you, I wasn't thinking clearly when
I posted that.

In any case, there are some things I need to collect full tax on, so
setting the tax rate to the incorrect amount (as you initially
suggested) wouldn't work, right?
 
E

emtaylor

No, what I think you are really trying to do is come up with TAX amount of
$6.60 on your sales of $100 (since that is the only part payable to the
state - the $86.60 amount is meaningless). The amount payable by customer
is $106.60, isn't it??
Use 6.6% rate on the full taxable amount, and that will calculate the proper
amount of sales tax payable. (And that is 80% of 8.25% anyway. The 6.1875%
you quoted is only 75%...)
You're right, but what if I need to collect full sales tax on other
items that are not classified as 'information services' - then I'm
kind of screwed, right?
 
E

emtaylor

On said:
You're right, but what if I need to collect full sales tax on other
items that are not classified as 'information services' - then I'm
kind of screwed, right?
I was just wondering if there was a legitimate way to do this in QB
without using an incorrect tax rate.
 
A

Allan Martin

Allan Martin said:
If you spent more time listening to the math teacher in 4th grade you
would not be posting the above. This is why our jobs are being lost to
workers in India and China.

Sorry about the insult perhaps I am off base. Back in the day I minored in
math in college so perhaps the solution that I gave is really not that
obvious to others.

If for certain services, only 80% of the fee charged is subject to sales
tax then using a rate of only 80% of the normal tax rate will result in the
correct tax collected. Is this concept that hard to grasp?

By the way what state are we taking about?
 
A

Allan Martin

You're right, but thanks for the nice message anyway. I was
confused. I actually initially thought that we were supposed to only
collect 80% of the tax and then I was told we are supposed to collect
tax on 80% of the bill. So, like you, I wasn't thinking clearly when
I posted that.

In any case, there are some things I need to collect full tax on, so
setting the tax rate to the incorrect amount (as you initially
suggested) wouldn't work, right?
Wrong, just set up a second tax, payable to the same state, only with a
different rate.
 
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E

emtaylor

Sorry about the insult perhaps I am off base. Back in the day I minored in
math in college so perhaps the solution that I gave is really not that
obvious to others.

If for certain services, only 80% of the fee charged is subject to sales
tax then using a rate of only 80% of the normal tax rate will result in the
correct tax collected. Is this concept that hard to grasp?

By the way what state are we taking about?
It's not hard to grasp. But there are some items I have to charge tax
on the FULL amount, and some that I need to charge on 80%. We sell
different types of services, but only those that fall under
"Information Services" are subject to the 80% law. This is Texas.

Can I set 2 different tax rates in QB? Is that what you are trying to
suggest?
 
E

emtaylor

Wrong, just set up a second tax, payable to the same state, only with a
different rate.
Okay, thanks. Unforunately, I work for a very small company. 8
employees. I don't do the accounting and have never worked with QB.
The person that does the accounting didn't know who to ask or where to
ask (she tried searching their site but didn't have much luck because
I think she didn't know what solution she was looking for) and I
offered to post this message on here. I'm sorry you think I'm such an
idiot, but I'm just not familiar with this software.

Now that I know that we can set 2 different tax rates, that may solve
our problem.

The only issue I see is that part of the taxes go to one entity, and
part to another - do you think that using the incorrect tax rate will
screw up our tax reporting?
 
A

Allan Martin

Okay, thanks. Unforunately, I work for a very small company. 8
employees. I don't do the accounting and have never worked with QB.
The person that does the accounting didn't know who to ask or where to
ask (she tried searching their site but didn't have much luck because
I think she didn't know what solution she was looking for) and I
offered to post this message on here. I'm sorry you think I'm such an
idiot, but I'm just not familiar with this software.

Now that I know that we can set 2 different tax rates, that may solve
our problem.

The only issue I see is that part of the taxes go to one entity, and
part to another - do you think that using the incorrect tax rate will
screw up our tax reporting?
Need greater detail concerning payment to two entities to answer.
 
L

Laura

It's not hard to grasp. But there are some items I have to charge tax
on the FULL amount, and some that I need to charge on 80%. We sell
different types of services, but only those that fall under
"Information Services" are subject to the 80% law. This is Texas.

Can I set 2 different tax rates in QB? Is that what you are trying to
suggest?
You can set up as many tax rates that you need in QB. Make the tax rate name
obvious to the accounting person. Better yet create a "cheat sheet" so that
she knows with tax rate to use when she does her billing.
 
B

Bob La Londe

We run into something similar in Az.

We are required to collect sales tax on 65% of the total for all contracting
jobs rather than 100% of materials and 0% of labor as is the case with
service and repair work.

It seemed unweildy and we had a "tax add in" item in our Quickbooks for
years where we would plug in:

(Contracting Total) X .65 X .087 = Sales Tax collected manually on each
contracting job.

Then one day I said, why not just calculate .65 X .087 and make that the tax
rate for contracting. Duh! .0565555 or 5.7%

We did this for each tax jurisdiction where we perform contracting, and now
we just have a contracting tax item for each location that automatically
calculates the sales tax for us.

When we set up the customer we setup a job for each location and one for
retail for our location for them. Sales taxes then get calculated properly
and automatically. Whenever the sales tax rates changes in one of the tax
jurisdictions we just recalculate the contracting rate for that jurisdiciton
and its done automatically again.

Woo! Hoo!






--
 
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B

Bob La Londe

It's not hard to grasp. But there are some items I have to charge tax
on the FULL amount, and some that I need to charge on 80%. We sell
different types of services, but only those that fall under
"Information Services" are subject to the 80% law. This is Texas.

Can I set 2 different tax rates in QB? Is that what you are trying to
suggest?
You can set a hundred different tax rates.



--
 
A

Allan Martin

Bob La Londe said:
You can set a hundred different tax rates.
Indeed one can, however it takes a little more knowledge of QB when the tax
rate or taxing jurisdiction varies amoung several items on the invoice.
 
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G

Golden California Girls

Bob said:
You can set a hundred different tax rates.
California has nearly that many. I believe you can have about 14500 tax rates.
 
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