Sales Tax and Rounding

Posted by Kevin on January 5, 2009, 8:25 pm

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The figure I get filling out my state sales tax return differs from what QB
says I owe. I know the problem is in how QB rounds versus what my tax form
figures. Problem is, my state form calculated what I owe by simply
multiplying total taxable sales (a number derived directly from the QB
report) by the sales tax rate (.05 or 5% in this case). This results in QB
saying I owe .03 more than the state expects me to send in. My question is,
how to I make this adjustment in QB??? I have already made a sales tax
adjustment to account for taxes I have already paid through my vendors.

I get so frustrated using the QB reports because they are always carrying
balances forward. Maybe it is a lack of understanding about the accounting
principles on my part, but when I look at a report for taxes owed from July
1 through december 31, I don't need to see a balance forward or cumulative
total if you will, of what has been collected prior to that date.

Posted by Laura on January 6, 2009, 8:19 am

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> The figure I get filling out my state sales tax return differs from what

> QB says I owe. I know the problem is in how QB rounds versus what my tax

> form figures. Problem is, my state form calculated what I owe by simply

> multiplying total taxable sales (a number derived directly from the QB

> report) by the sales tax rate (.05 or 5% in this case). This results in QB

> saying I owe .03 more than the state expects me to send in. My question

> is, how to I make this adjustment in QB??? I have already made a sales tax

> adjustment to account for taxes I have already paid through my vendors.

Just do a sales tax adjustment to get rid of the pennies due to rounding
differences. Use something like your over/short account for the adjustment.
As long as the differences each month are only pennies then don't worry
about it.

> I get so frustrated using the QB reports because they are always carrying

> balances forward. Maybe it is a lack of understanding about the accounting

> principles on my part, but when I look at a report for taxes owed from

> July 1 through december 31, I don't need to see a balance forward or

> cumulative total if you will, of what has been collected prior to that

> date.

What report are you refering to? Sales will always be reported for the time
frame specified but payables will always be reported as the balance as of
the end date specified in the report. Payables always show balances --
that's the nature of balance sheet accounts.

Posted by Kevin on January 6, 2009, 7:38 pm

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I have the rounding error figured out. It turns out I have done that before,
but what has been tripping me up is that apparently, at some point along the
line there was a discrepancy between what my "Sales Tax Liability Report"
gave me for figures versus what I put on a tax form. My guess at this point
is, I used figures from a P/L statement to fill out the form instead of
using the internal ST report which differs for whatever reason. So now the
problem is, QB is keeping a cumulative total of collected tax and tax
payable. So at this point, when I run a report for any tax period (I pay
semi-annually), the numbers on the report do not mirror what is on the
corresponding tax form. I see GL entries where I made adjustments to account
for the rounding and where I decreased the amount owed by the amount of tax
I paid out to vendors. I am completely lost as to where the discrepencies
are occuring. I'm not sure if I changed a transaction(s) in the past that
has created this or what, but I would like to start from scratch! Is there
any way to zero out the balances at some point? Other suggestions. (and
before you suggest "get an accountant" I have one, first time for this tax
season, but generally would like to have the basics in order before handing
the books over to him).

>> The figure I get filling out my state sales tax return differs from what

>> QB says I owe. I know the problem is in how QB rounds versus what my tax

>> form figures. Problem is, my state form calculated what I owe by simply

>> multiplying total taxable sales (a number derived directly from the QB

>> report) by the sales tax rate (.05 or 5% in this case). This results in

>> QB saying I owe .03 more than the state expects me to send in. My

>> question is, how to I make this adjustment in QB??? I have already made a

>> sales tax adjustment to account for taxes I have already paid through my

>> vendors.

> Just do a sales tax adjustment to get rid of the pennies due to rounding

> differences. Use something like your over/short account for the

> adjustment. As long as the differences each month are only pennies then

> don't worry about it.

>> I get so frustrated using the QB reports because they are always carrying

>> balances forward. Maybe it is a lack of understanding about the

>> accounting principles on my part, but when I look at a report for taxes

>> owed from July 1 through december 31, I don't need to see a balance

>> forward or cumulative total if you will, of what has been collected prior

>> to that date.

> What report are you refering to? Sales will always be reported for the

> time frame specified but payables will always be reported as the balance

> as of the end date specified in the report. Payables always show

> balances -- that's the nature of balance sheet accounts.

Posted by Kevin on January 6, 2009, 8:00 pm

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A correction or addendum to my previous post. After a bit more research, the
discrepancy began in TY 2006. When I run the sales tax liability report for
that tax year (I was filing annually at the time) it does not match the
numbers on the hard copy that I printed at the time. The same is true for my
P&L statement. Current run report does not match up with the hard copy. I
don't know exactly how this happened (but pretty sure I make boo boo) but I
am confident that I have not cheated the gov't what they were owed. I know
that at a time previous I did some "cleanup" work on the books to
consolidate some accounts and move some accounts around. What I though was
simple stuff to streamline the books. In hind sight, perhaps not the best
idea. So the trouble now is, whatever changes I made that altered those
figures is forcing QB to recalculate my sales tax liability, so when I run a
liab. report for the current period, it is including the amounts that were
allegedly under and/or overpaid based on the new figures. What are my
options at this point (besides whimper and bang my head against the desk -
because that is a given)?

>I have the rounding error figured out. It turns out I have done that

>before, but what has been tripping me up is that apparently, at some point

>along the line there was a discrepancy between what my "Sales Tax Liability

>Report" gave me for figures versus what I put on a tax form. My guess at

>this point is, I used figures from a P/L statement to fill out the form

>instead of using the internal ST report which differs for whatever reason.

>So now the problem is, QB is keeping a cumulative total of collected tax

>and tax payable. So at this point, when I run a report for any tax period

>(I pay semi-annually), the numbers on the report do not mirror what is on

>the corresponding tax form. I see GL entries where I made adjustments to

>account for the rounding and where I decreased the amount owed by the

>amount of tax I paid out to vendors. I am completely lost as to where the

>discrepencies are occuring. I'm not sure if I changed a transaction(s) in

>the past that has created this or what, but I would like to start from

>scratch! Is there any way to zero out the balances at some point? Other

>suggestions. (and before you suggest "get an accountant" I have one, first

>time for this tax season, but generally would like to have the basics in

>order before handing the books over to him).

>>> The figure I get filling out my state sales tax return differs from what

>>> QB says I owe. I know the problem is in how QB rounds versus what my tax

>>> form figures. Problem is, my state form calculated what I owe by simply

>>> multiplying total taxable sales (a number derived directly from the QB

>>> report) by the sales tax rate (.05 or 5% in this case). This results in

>>> QB saying I owe .03 more than the state expects me to send in. My

>>> question is, how to I make this adjustment in QB??? I have already made

>>> a sales tax adjustment to account for taxes I have already paid through

>>> my vendors.

>> Just do a sales tax adjustment to get rid of the pennies due to rounding

>> differences. Use something like your over/short account for the

>> adjustment. As long as the differences each month are only pennies then

>> don't worry about it.

>>> I get so frustrated using the QB reports because they are always

>>> carrying balances forward. Maybe it is a lack of understanding about the

>>> accounting principles on my part, but when I look at a report for taxes

>>> owed from July 1 through december 31, I don't need to see a balance

>>> forward or cumulative total if you will, of what has been collected

>>> prior to that date.

>> What report are you refering to? Sales will always be reported for the

>> time frame specified but payables will always be reported as the balance

>> as of the end date specified in the report. Payables always show

>> balances -- that's the nature of balance sheet accounts.

Posted by Laura on January 6, 2009, 8:36 pm

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First do an adjustment dated 1/1/2008 to clear any prior year errors. Open
the sales tax payable account register by way of the chart of accounts. Look
at your 12/31/07 balance and substract any your December 2007 sales tax
payment made in January 2008. Use this balance for the first adjustment. I'm
assuming (or rather hoping) that the amount of the adjustment is not
material. The purpose it to clear your prior year(s) balances so that you
can start from scratch on 1/1/08.

You probably should check to see that your 12/31/07 financials match those
supplied to the accountant at tax time. I would also "close" your QB file as
of 12/31/07 so that any changes to items, etc won't impact prior years.

Next, I would run a sales tax liability report for the entire year. You
should see the correct year end liability. Check your sales tax forms filed
through November 2008 vs what is currently reported. Take the annual numbers
(sales & tax) and subtract your November YTD amounts reported to the state.
The difference is the amount you owe for December.

You may need to do another adjustment to clear out any differences due to
rounding as your final step.

>A correction or addendum to my previous post. After a bit more research,

>the discrepancy began in TY 2006. When I run the sales tax liability report

>for that tax year (I was filing annually at the time) it does not match the

>numbers on the hard copy that I printed at the time. The same is true for

>my P&L statement. Current run report does not match up with the hard copy.

>I don't know exactly how this happened (but pretty sure I make boo boo) but

>I am confident that I have not cheated the gov't what they were owed. I

>know that at a time previous I did some "cleanup" work on the books to

>consolidate some accounts and move some accounts around. What I though was

>simple stuff to streamline the books. In hind sight, perhaps not the best

>idea. So the trouble now is, whatever changes I made that altered those

>figures is forcing QB to recalculate my sales tax liability, so when I run

>a liab. report for the current period, it is including the amounts that

>were allegedly under and/or overpaid based on the new figures. What are my

>options at this point (besides whimper and bang my head against the desk -

>because that is a given)?

>>I have the rounding error figured out. It turns out I have done that

>>before, but what has been tripping me up is that apparently, at some point

>>along the line there was a discrepancy between what my "Sales Tax

>>Liability Report" gave me for figures versus what I put on a tax form. My

>>guess at this point is, I used figures from a P/L statement to fill out

>>the form instead of using the internal ST report which differs for

>>whatever reason. So now the problem is, QB is keeping a cumulative total

>>of collected tax and tax payable. So at this point, when I run a report

>>for any tax period (I pay semi-annually), the numbers on the report do not

>>mirror what is on the corresponding tax form. I see GL entries where I

>>made adjustments to account for the rounding and where I decreased the

>>amount owed by the amount of tax I paid out to vendors. I am completely

>>lost as to where the discrepencies are occuring. I'm not sure if I changed

>>a transaction(s) in the past that has created this or what, but I would

>>like to start from scratch! Is there any way to zero out the balances at

>>some point? Other suggestions. (and before you suggest "get an accountant"

>>I have one, first time for this tax season, but generally would like to

>>have the basics in order before handing the books over to him).

>>>> The figure I get filling out my state sales tax return differs from

>>>> what QB says I owe. I know the problem is in how QB rounds versus what

>>>> my tax form figures. Problem is, my state form calculated what I owe by

>>>> simply multiplying total taxable sales (a number derived directly from

>>>> the QB report) by the sales tax rate (.05 or 5% in this case). This

>>>> results in QB saying I owe .03 more than the state expects me to send

>>>> in. My question is, how to I make this adjustment in QB??? I have

>>>> already made a sales tax adjustment to account for taxes I have already

>>>> paid through my vendors.

>>>

>>> Just do a sales tax adjustment to get rid of the pennies due to rounding

>>> differences. Use something like your over/short account for the

>>> adjustment. As long as the differences each month are only pennies then

>>> don't worry about it.

>>>

>>>> I get so frustrated using the QB reports because they are always

>>>> carrying balances forward. Maybe it is a lack of understanding about

>>>> the accounting principles on my part, but when I look at a report for

>>>> taxes owed from July 1 through december 31, I don't need to see a

>>>> balance forward or cumulative total if you will, of what has been

>>>> collected prior to that date.

>>>

>>> What report are you refering to? Sales will always be reported for the

>>> time frame specified but payables will always be reported as the balance

>>> as of the end date specified in the report. Payables always show

>>> balances -- that's the nature of balance sheet accounts.