Calculating Sales Tax on Credit Memos

Summary

When you need to issue a credit to a customer, it is important to also reverse the associated sales tax. This guide shows how to calculate tax on a Credit Memo so that it is properly recorded as a return in TaxCloud.

Calculating Sales Tax with TaxCloud Integration in QuickBooks Online.mp4 1444x1052

Step-by-Step Instructions

1. Create a Credit Memo: Navigate to Sales > All Sales > New Transaction > Credit Memo.
2. Select Customer: Choose the customer receiving the credit.
3. Add Items: Enter the specific products or services being credited.
4. Calculate Tax: Click the Calculate Tax button.
5. Verify Return Status: The system will calculate the tax amount that should be credited back.

TaxCloud Impact

• Recorded as a Return: Credit Memos are captured as "Returns" in TaxCloud.
• Liability Reduction: This transaction will strictly reduce your total tax liability for the reporting period, ensuring you do not pay taxes on sales that were reversed.