Hello, I am a little confused about setting the sales tax code.
I am in California and we are subject to collect tax when you have a seller permit, in other words, I don’t pay taxes for products I buy from a vendor to whom I provided my California seller permit and once tax is collected, then it gets reported to the tax agency.
My question is, If I add the tax code at the moment of purchase invoice when buying inventory from my vendor, it will add a 10% of the cost of the inventory product into my tax code liabilty account, so this mean that I always have a balance even after submitting the tax code payment to the state agency in case i am allowed to offset, otherwise i will need to pay/report the total tax amount collect it from vendors when purchasing?
If the Seller Permit that you hold allows you to purchase inventory items without paying the sales tax you would not need to record tax on purchases but record tax only on sales.
The other option would be to have an “exempt” code set a 0% that you could use on your purchases.
yes, the reseller permit i have allows me to do that.
When i used quickbook i was just buying from the supplier and posting the amounts with no tax code then whe item sales, i charge taxes to end customer and so i collect and report the agency.
What will be the benefit of creating a tax code exempt 0% when purchasing? wouldn’t be the same as without it?
You may wish to distinguish between items that do not attract sales tax and those that the Seller Permit allows you to purchase exempt, otherwise it is probably not necessary.
good point!
Sorry, but something weird is happening or my brain is tired.
I just created a tax code for California sales tax equal to 10% but when I apply it to sales items, it doesnt not calculate correctly, see screenshot. Is this calculating the sales tax based on the purchase of inventory rather than the final sale?
tax collected should be $4thanks guys
Edited: Looks like i have to click TAX exclusive when sales.
That’s correct, as is illustrated in the Guide and discussed dozens of times on the forum.