Sales tax calculations for historical transactions
Solution No. 196
If sales tax is turned on in QuickBooks, transactions are calculated using the sales tax item setup under the company preferences at the time the transaction is processed. If down the road you decide to edit old transactions, keep in mind that QuickBooks will calculate those old transactions based on the current sales tax setup in the company preferences not the original sales tax rate.
At some point in time, you may need to go back and edit old transactions in your QuickBooks file. It is not recommended that you edit transactions that are outside your QuickBooks closing date. If you're going to edit them anyway, best to proceed with caution, speak with your accountant and lastly, backup!
Sales Tax Calculations
If you have sales tax turned on under your company preferences, the sales tax item you've selected is used to calculate the sales tax amount on your estimates, invoices, sales orders and other transactions at the time the transaction is created. This means if later in the year you select a different sales tax item and go back and edit an old transaction, guess what happens? Your sales tax amount will be different on that old transaction. Why? Because QuickBooks is going to calculate the tax using the current sales tax rate, not the original sales tax rate used when the transaction was first created. For example:
- In 2011, my company sales tax rate was set to 5% and I had a sales tax item called "Taxable" set to 5%.
- In 2012, my company sales tax rate was changed to 6%. I edited my sales tax item called "Taxable" to 6%.
- I update all my invoices for 2011 with proper sales reps and saved these transactions. I later notice that all transactions now have a different sales tax amount based on the 6% rate. Why? Because my company sales tax rate is now 6% instead of 5% and as a result, the current sales tax rate was used.
In the event that you need to change your sales tax rate in QuickBooks, it is recommended and a best practice to create a new sales tax item with the new rate, rather than editing the sales tax rate of an existing sales tax item.
Using the QuickBooks SDK vs. QuickBooks User Interface
Method uses the QuickBooks SDK ("Software Development Kit") to talk with QuickBooks. This SDK is provided to developers by Intuit and is the same SDK used by all developers who work with QuickBooks. It is important to note that editing transactions outside of the QuickBooks interface using the SDK will provide a slightly different results then editing the historical transaction directly in QuickBooks. This issue will be the same for any third-party company that talks to QuickBooks using the SDK so it is important to be aware of this while making changes to transactions.
This article applies to the following versions of QuickBooks.
- QuickBooks Desktop 2004 Pro or higher