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How to Track Non-Taxable Sales in QuickBooks Online

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Unlike in QuickBooks for Desktop (Windows), there is no Sales Tax Revenue report in QuickBooks Online. Furthermore, you can't have multiple non-taxable sales tax codes. A customer or product/service is either taxable or not based on a checkbox. This can be a problem for small businesses in states such as Arizona that has multiple localities where sales tax is reported separately from the state and non-taxable deductions have to be reported on their forms when filing. 

However, there is a solution:

Create a new sales tax item called "Resale" with a zero percentage rate and create a new Agency called "Resale." 

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For all resale or tax-exempt customers, check the box for taxable and use the Resale sales tax code.

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Record the sales receipt or invoice for your customers as you normally would.

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In the Sales Tax Center, your resale non-taxable sales amount for the period is now easy to find.

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And in the Sales Tax Liability Report:

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For non-taxable services, such as Labor, or products, such as Fuel or Oil, just create an item that is non-taxable.

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Whether the customer is taxable or resale, use the non-taxable products and services on sales transactions.

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Run a Report for each non-taxable product and service for the tax period.

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Or just run one and customize it by Transaction Date: Last Month and Group by Product/Service (for General), selecting all non-taxable items (for Rows/Columns), and Save Customizations.

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Then when working on sales tax, just run this report and use the total amounts for each non-taxable product and service.

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It is important that all customers have the taxable checkbox checked so that only the non-taxable products and services will tie in with the non-taxable sales.

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