A QuickBooks HST Sales Tax Code Problem

Posted by on Feb 2, 2011 in News Updates | 2 comments

 

I ran across a problem with the HST Sales Tax Code that QuickBooks had set up as a default code. This did not get picked up until the HST quarter filing, when it was discovered that the Tax Item for Purchases was not picking up the amounts in a general ledger account. In other words, the HST account was only picking up the HST Received from Sales but not the HST paid or the ITC.

When I investigated this a little further I noticed that in the Item List the HST for Purchases, or for some it might be called HST (BC) ITC , was blank. Somehow the Sales Tax Return line which should have been pointing to the line 106, Input Tax Credits needed to be fixed, or the Sales Tax filing was going to be incorrect. The other line that was incorrect was the Tax Agency line. What a mess the QuickBooks software had created!

Since QuickBooks is set up so that you cannot go back and change previous Sales Tax Codes, I was going to have to set up a new code, go back and edit all the transactions that related to purchases. OK, that just meant some time involvement, but what about the HST on Sales?  It didn’t make sense that the HST would have two different codes, one for sales and one for purchases.

Let me explain in case this has become confusing, because it sure was for me. The “H” was the original default Sales Tax Code which pointed to HST Sales and HST Purchases. The Sales side was fine but not the Purchases. So now there has to be a new code setup, let’s call it HN (HST New) since you only have three characters to work with.  Not only that, but you have to create a new Sales Tax Item for the Sales and Purchases also.

After setting up the code and items, you now have to go back and change ALL the Tax Codes for Sales and Purchases.  Once you have done all of the editing then you will be able to go ahead and File Sales Tax. 

I would suggest that you contact your QuickBooks Trainer or ProAdvisor for help if you come across this problem.

Remember that you can follow me on Twitter @twitter.com/QuikBooksTrainr for tips and updates also.

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2 Responses to “A QuickBooks HST Sales Tax Code Problem”

  1. Zeitman says:

    Thanks for this post. In QB2011, I noticed that the HST sales tax code “H” has a taxable status of “Non-Taxable/Exempt”. I want to change this to “Taxable”, and set the Tax Items for Purchases and Sales to 13% for Ontario.

    However, when I try to do this, I get the following message:
    “You cannot change the taxable status of a sales tax code that has been used in a transaction.”

    The code “H” has not been used in any transaction. I ran a report for ALL transactions filtered on “H” and, as expected, nothing showed up.

    The workaround is to create a new code, but is there a reason why I cannot edit “H”?

    • Larry Johnson says:

      It would be hard to respond without seeing your Company file. Try going into Manage Sale Tax and see how H is set up. Your only alternative may be to create a new Tax code & call it HON.
      Just had a thought. Go to items & see if the H points to a General Ledger account. You need an item for Sales & Purchases. They both need to point to a HST Payable account. Also, make sure your QB release is current R4P.
      Hope this helps. If not I would have to look at your Company file via remote.
      Larry

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