QuickBooks and Interact Tax Overview

QuickBooks Taxes

In QuickBooks there are 3 inter-related tax items:

• Tax Item
• Tax Group
• Tax Code

QuickBooks Sales Tax Item / Link to Interact Tax Authorities

A Sales Tax item is used to add and calculate tax charges when making a taxable sale. Set up a sales tax item for each county, district, city, etc. where sales tax is collected

When adding Sales Tax Items to QuickBooks enter the % of tax to charge and select the Tax Agency from the list of available Tax Agency Vendors. The vendor must be added if it does not exist.

Interact will link tax authorities with QuickBooks Sales Tax Items.

QuickBooks Sales Tax Group / No Link to Interact

A Sales Tax Group is used when multiple sales tax items appear on the same sales transaction. A sales tax group will track and report sales taxes individually and show as a single line item on invoices and sales receipts.

QuickBooks Tax Groups are not used with QuickBooks Synchronization. A customer may use them in QuickBooks for other purposes outside of Interact. Do not get confused if you see Tax Groups used in QuickBooks. Interact does not use them.

QuickBooks Tax Code / Link to Interact Tax Code

In QuickBooks the Tax Code is used to track taxable and non-taxable sales and/or customers. Interact will use it to track taxable and non-taxable sales. Setting up and assigning the correct sales tax code will allow the user to run a report that divides the total taxable and non-taxable sales.

Two tax codes are automatically created when sales tax in QuickBooks is turned on. TAX (taxable) and NON (non-taxable). TAX is used for items and customers where tax needs to be collected. NON is used for items and customers that are exempt from tax such as non-profit organizations, out-of state sales, or items customers will resell.

Customers are able to create a custom Sales Tax Code List in QuickBooks and associate the QuickBooks tax codes with Interact tax codes. This will enhance the QuickBooks tax reporting capabilities. Tax codes are 3 characters long and each one can be noted as taxable or exempt.  Tax Codes in QuickBooks are different than how we use Tax Codes in Interact. In Interact a Tax Code is a group of taxing authorities used to create a total tax percentage. QuickBooks uses Tax Groups to do the same thing.

Interact Taxes

In Interact there are 2 inter-related tax items:

• Tax Authority
• Tax Code

Interact Tax Authority / Link to QuickBooks Sales Tax Item

Similar to QB, the Tax Authority takes the place of Tax Item and Tax Agency Vendor.  In QB, a Tax Item can only point to a single Tax Authority.  Interact merges these two separate identities into a single identity. 

Interact Tax Code / Link to QuickBooks Sales Tax Code

The Interact Tax Code has the same functionality of the Tax Group in QB.  The difference is that in Interact, we require a Tax Code for all transactions. QB allows you to assign either a Tax Item or a Tax Group to an invoice, Interact requires our Tax Code (the QB Tax Group) to always be used.  Sometimes our Tax Code only has a single Tax Authority, other times it is a composite made up of multiple Tax Authorities.  This can be done in QuickBooks if someone wanted.

How Taxes are calculated differently in QuickBooks and Interact

Taxes are calculated in Interact on each transaction.

Taxes are calculated in QuickBooks on each invoice (made up of one or many transactions).

This difference in how taxes are calculated can cause penny rounding issues. Other ticketing applications simply transfer each transaction as an invoice. AWS discovered long ago it is possible for penny rounding differences to occur even if each transaction or multiple item ticket is transferred as an invoice. Customers also prefer having multiple transactions listed on a single invoice.

If the data transfer between Interact and QuickBooks were to allow QuickBooks to calculate the sale tax, it would result in the QuickBooks invoice total to not match, to the penny, the Interact invoice. AWS has learned that accountants frown upon penny differences in accounting and should be avoided if at all possible.

Solving Tax Rounding Issues

To eliminate sales tax rounding issues the QuickBooks Synchronization module has disabled the QuickBooks tax calculation and will transfer in all taxes as line items on the invoice.

To disable tax calculation, the entire invoice is marked as a 0% tax.  There must be a tax item in QuickBooks that has a 0% tax rate that is assigned to the invoice. This tax item will be displayed in the Tax field at the bottom of the QuickBooks Invoice.

The next step requires Interact to transfer in the taxes collected and deposit them into the correct Tax Escrow account.  This is done by linking the Tax Authorities in Interact to the proper Tax Items in QuickBooks.  Any money collected via taxes for a Tax Authority in Interact will transfer to the matching Tax Item in QuickBooks .  As many lines on the invoice will be transferred to match the number of Tax Authorities in Interact. Penny for penny matching.

Taxable / Non-Taxable

A jurisdiction is the taxation authority that imposes the tax. Each jurisdiction is identified by a tax code. This code provides the location (tax or non) for the transaction to be taxed.

QuickBooks uses Tax Codes to determine whether an item was taxed or not. Simple Tax Jurisdiction in QuickBooks uses two generic built in tax codes to report taxable and non-taxable sales. To increase system flexibility a user can create their own list of tax codes in QuickBooks to track taxable and non-taxable for each taxing authority.

Either tax jurisdiction method will work. Setup depends on how the business needs to report their taxable / non-taxable sales. Always setup for multiple tax jurisdictions if it is uncertain or unknown how taxable / non-taxable sales should be configured. 

Tax collection for a Simple Tax Jurisdiction (Taxing Authority)

Two tax codes are automatically created when sales tax in QuickBooks is turned on. TAX (taxable) and NON (non-taxable). When QuickBooks Synchronization module adds each line to the invoice, it will mark whether the sale was taxable (TAX) or non-Taxable (NON). Since a transaction in Interact may have multiple charges (i.e. base charge, added charges, and freight charges) that may be taxed differently, the transaction will be split up into each charge type and transferred as separate line items to the QuickBooks invoice.  Each line will be marked separately whether it is taxable or not using the “Tax” and “Non” Tax codes.  This will allow tax reporting in QuickBooks to total all revenue in the correct jurisdiction (Tax / Non) for filing tax reports.

Tax collection for Multiple Tax Jurisdictions (Multiple Taxing Authorities)

Multiple tax jurisdictions will need to be set up when a business is required to report taxable / non-taxable sales for each taxing authority. This will allow QuickBooks to report Non-Tax sales when a tax code other than Exempt is selected and any part of the transaction or the material is considered exempt. This functionality will replace the simple tax jurisdiction functionality explained above.  “Tax” and “Non” do not contain the functionality required for this level of tax reporting.

Each taxable and non-taxable Tax Code in QuickBooks will have an associated taxable and non-taxable Tax Code in Interact. These links will allow each line item to be noted with the correct taxing authorities.  It will match exactly how Interact calculated the tax and how the QuickBooks Synchronization module deposited the amounts in the Tax Agency Vendor account. By matching the Tax Code names in Interact with the Tax Code names in QuickBooks, tax reports in QuickBooks will match to the penny exactly how Interact calculated taxes.