Cash basis Sale Tax liability

Maybe your client isn't recording sales tax correctly.

Does your client take any customer deposits that possibly aren't being recorded correctly?

Maybe - I looked at one invoice where he received full payment for the complete invoice but still, somehow, QB showed a different amount for the "original amount" and the "paid amount". I'm confused. I will discuss this particular invoice with him. Have you ever had a similar problem?

If your client takes deposits and then applies them to invoices QB will automatically apply that deposit as a cash payment (if it is a 1500.00 deposit QB will pull out the proper sales tax and then apply the rest to sales).

So if you post an invoice into QB in January for 5000.00 and apply a deposit to it of 1500.00 in January on a cash basis QB will calculate 1378.67 in cash sales and put the remaining into sales tax payable (this is based on a sales tax of 8.8%). If that was the only transaction in January then your cash basis sales is 1378.67. If the rest of the payment came in February the remaining amount would post then.

I don't know if this helps.

Thanks so much. By narrowing down which invoices caused the discrepancy I had noticed that my client was putting in negative amounts to the invoice to cover deposits. Your information is very helpful as I'm starting to see how QB works. So, if the deposit and the remaining payments occurred in the same month, the cash basis sales tax report should be 'correct' right?

The tax basis report will be the exact amount of the total invoice if the deposit and remaining payment occurs in the same month.

QB is calculating the cash basis sales tax correctly by including the deposit amount applied regardless. it is claiming the deposit as revenue when it is applied to an invoice. The original deposit should just be posted to a liability account "customer deposit" and no sales tax is applied to it.

the total tax liability for the month is the total of actual payments PLUS any deposit amounts applied to invoices. If you do a cash basis report and then click onto an income account to see the detail in there you will see actual payments AND customer deposits applied to the account. if your client received (in net sales) 25,000 in payments and applied (net) 4500.00 in deposits the total tax liability for the month is 29,500.00 this is the correct way. a customer deposit on a job is recognized as income when it is applied to an actual invoice-not when it is origianally received.

I have read the thread. I would also want to know what state this client is in. For example, California is all on an accrual basis, so that should match your preference for sales tax in the setup.