While working on a client project recently, I discovered a key difference in the set up of sales tax codes in QuickBooks Online (QBO) compared to QuickBooks Pro/Premier/Enterprise (desktop versions).

Thought I’d share what I found with you…

QBO SETUP OF TAX CODES

When you create a tax code in QBO, you will fill in the tax rate name, the agency name, and the sales tax rate. QBO builds a table that looks like this:

Key thing to know – as soon as you add a new agency name, QBO will automatically add a new account to your chart of accounts to track the sales tax that is due for that agency. Here is what the above looks like in my chart of accounts:

This can get very confusing if you are trying to issue one payment/check that pays different tax agencies. Fortunately, QBO provides a quick option to rename an agency if you find you made a mistake and need to fix it (this will allow you to get your agency names properly aligned):

This is VERY different than how QuickBooks Pro/Premier/Enterprise handles the tracking of sales taxes

QUICKBOOKS DESKTOP SETUP OF TAX CODES

When you set up a tax code in Pro/Premier/Enterprise, you provide a code name, description, rate and agency that you pay the taxes to. Sample listing here:

Key thing to know – regardless of how many different agencies you create, QuickBooks desktop is going to post ALL of the sales taxes into one ledger account called Sales Tax Payable. It will NOT create a separate account in your chart of accounts for EACH tax agency as QBO does.