Sales tax on inventory

Per your suggestion, If I enter each item as I receive it and increase the cost per item to include the sales tax paid then that will keep my COGS accurate.

How do I "fix" the sales ticket?  I still want my cutomers invoice to show each item cost, a subtotal, a tax amount, and a total due. Right now , I enter the item number and qty. QB calculates the sales tax and I print the invoice. But this creates that outstanding sales tax liability account that I shouldn't have because the tax has already been prepaid when I purchased the items.

AND, how do I fix the current outstanding ST liability account to show 0?

It doesn't work that way, at least in any state I have heard of.

Sales tax is function of retail sales, if you retail you collect sales tax, hold on to it, and pay it.

If you retail and you buy items for retail, in most states you have the option to buy tax free by filling in a form and handing it to your vendor.

Some states allow you to take a credit for sales tax paid on the items you retail, I have not worked with that and just thinking about how to track it in QB is a problem.

I am working with a group in Independent Sales people.  They order products at wholesale cost and pay shipping, and sales tax (on the retail amount) up front. Then they sell to their customers and recover the sales tax. The company that sells them the products pays the state sales tax amounts. For income tax purposes, the sales tax collected by the IS person is included as part of their income and the sales tax that was prepaid on the products is part of COGS.

What if I make an inventory item called Sales Tax, enter every item as non taxable, and include a line item on each invoice for sales tax instead of letting QB figure the tax for me?  That seems really inconvenient but it's all I can think of.

Ok see this a different situation, this is like a mary kay kind of thing.

Do not set up sales tax at all, the company is taking care of that for you.  In QB sales tax always uses sales tax payable.  Create an Other charge item called sales tax, point it to an income account, use that item on the sales document.

Use the invoice designer to get rid of the stock sales tax block on the sales document.

All you do is sell the product and the total sales is income.

Some states allow that, you need to check with your state office.

When you pay sales tax in that situation are you using adjust sales tax and decreasing the amount due and using that account as the source - you should be.

Be sure you mark those receipts so you can find them in the event of a state sales tax audit, that kind of thing they look at.

Since the IRS says any cost including taxes is part of cost I have no clue what they will say about it, but if you are doing it all the time and the state allows it, I would guess it would pass.