Amazon to QuickBooks Online Accounting: Configuring Sales Tax and Marketplace Facilitator Tax
- By Hung Truong
This step-by-step guide will show you how to set up sales tax in QuickBooks Online from a brand new company.
If you’re not careful, sales tax collected through Amazon may be different from the sales tax calculated in QuickBooks Online. You’ll want to make sure that invoices you create in QuickBooks Online display the correct sales tax collected. Otherwise, your accounts may not reconcile properly.
- Set up QuickBooks Online Sales Tax with new Automated Sales Tax engine
- Set up QuickBooks Online Sales Tax with old sales tax engine
- Configuring QuickBooks Online Marketplace Facilitator Tax service item and bank account
- Sample QuickBooks Online invoice with Marketplace Facilitator Tax and Tax Override
- Paying the Marketplace Facilitator Tax liabilities with the Marketplace Facilitator bank account
- Other articles in our Amazon to QuickBooks Online Accounting Series
Setting up Sales Tax in QuickBooks Online with new Automated Sales Tax
QuickBooks Online’s new automated sales tax engine makes configuring sales tax very simple for users. Users no longer need to manually configure districts or city taxes. Instead, just enter the state and filing frequency, and QuickBooks Online will take care of the rest!
Look through this visual guide for setting up QuickBooks Online Sales Tax.
If you’re collecting and remitting sales tax for your state, select the filing frequency and start date. When you pay, you’ll select your Bank account that you used to pay your sales tax liability.
If you’re using Amazon FBA, you’ll also want to configure sales tax for the states that have passed marketplace facilitator sales tax or similar legislation. This includes, but isn’t limited to, Minnesota, Oklahoma, Pennsylvania, Washington.
More states are anticipated to pass similar legislation, so you’ll have to add these tax agencies as the law goes into effect.
While Amazon collects for FBA sales to customers in affected states, they won’t collect for FBM sales unless you configure taxes on your Amazon account.
Every state has a different threshold for reporting or collecting. You’ll want to speak to your tax professional regarding your business.
We’ll continue with adding Pennsylvania. The process is the same for any other sales tax agency.
When you have an invoice with sales tax to any state, overwrite what QuickBooks automatically enters with the amount that Amazon collects if the two amounts are different. We’ll go over how to do this below.
Setting up Sales Tax in QuickBooks Online with Old Sales Tax
Some users will be presented with this screen to switch to the new automated sales tax engine used earlier in this article. We’ll continue with the old tax center.
Add any additional states you need. Use the general state sales tax rate for each state you set up unless you want to manually set up the combined tax rate.
When you have an invoice with sales tax to any state, overwrite what QuickBooks automatically enters with the amount that Amazon collects if the amounts are different. We’ll go over how to do this below.
Setting up QuickBooks Online Service Item and Bank Account for Amazon FBA Marketplace Facilitator Sales Tax
Once you’ve configured sales tax agencies for your QuickBooks Online company, you’ll need to complete one more step if you do FBA. You’ll need to set up a Bank account (Detail type: Cash) as an offset account for the Marketplace Facilitator Tax liabilities.
To do this properly, you’ll have to create a Marketplace Facilitator Tax service item linked to the Marketplace Facilitator Tax bank account. Once you’ve created the service item linked to the bank account, you’ll select this Marketplace Facilitator Tax service item as the line item on your affected invoices.
Once you’ve created the bank account, you’ll need to create the service account that links to this account you’ve just created.
Once you’ve saved the service item, you can now select this item for both your Marketplace Facilitator Tax Shipping and Marketplace Facilitator Tax Shipping. For invoices that have taxes on sales and shipping, sellers can choose to sum up those taxes into one line item. Or sellers can use the same service item twice with the different amounts.
Another option is to create separate service items for Marketplace Facilitator Tax Principal and Marketplace Facilitator Tax Shipping. If you choose to do this, then link them both to the same Marketplace Facilitator Tax bank account.
Some sellers will want this level of separation, but it’s not really necessary since taxes are deposited to and paid from the same offset bank account.
What’s important is that the amounts are correct whatever option you choose. When you create the invoice, the amounts will be properly deposited into the right accounts.
Example of QuickBooks Online Invoice with Marketplace Facilitator Tax and Tracking
Here’s how all of this works in QuickBooks Online with an Amazon invoice. We’ll create a QuickBooks Online invoice with Marketplace Facilitator Sales Tax collected. Then we’ll go ahead and pay that sales tax liability using the Marketplace Facilitator Tax bank account.
Once you’ve entered the amounts in the invoice, double check that the sales tax that QuickBooks Online automatically calculates is correct. If it’s correct and all the numbers are correctly entered, save the invoice.
If the sales tax entered is not correct, follow the instructions below to override the sales tax.
Notice all of the amounts are now correct. The total sales proceeds (Balance due) is the same amount as what Amazon displays.
Why is all of this important? If you don’t set it up properly, then the Marketplace tax will be deposited into the wrong account. If you later pay the Marketplace Tax liabilities from another account, then the amounts won’t reconcile properly.
See below for how a properly configured sales tax setup looks like once the items and accounts are properly configured.
Offsetting your Marketplace Facilitator Tax liabilities using the Marketplace Facilitator Tax Bank Account
Here’s how your sales taxes would look like and how you’d offset the tax liabilities for the Marketplace Facilitator taxes. Note: Do not use this account for sales taxes that you collect and remit.
Depending on the Filing Frequency you selected when setting up the states affected by the Marketplace Tax, you’ll see this Overdue return. Since Amazon is handling sales tax for those states, you can set the filing frequency to annual. That way, you’ll only have to manage this once a year.
You’ll still have to manage sales taxes that you collect and remit though.
The Overdue message will go away once you’ve paid the sales tax due from the Marketplace Facilitator Tax bank account.
Congratulations! You’ve successfully configured sales tax in QuickBooks Online. You’ve also properly and accurately recorded the sales tax that Amazon collects for its Marketplace Tax!
It’s important that you track sales tax even when you’re not the one collecting and remitting it. Using an accounting software like QuickBooks Online track sales tax means that you’ll always have a record in the event you need it.
You can automate all of the document creation for your Amazon seller account. SellerZen automatically imports all transactions in real-time so that your QuickBooks Online company is always up-to-date. Give us a try for free now!
Learn more about other bookkeeping topics through our articles on accounting for Amazon businesses:
- Amazon to QuickBooks Online Accounting: Configuring your New Company
- Amazon to QuickBooks Online Accounting: Using Purchase Orders to Receive Inventory
- Amazon to QuickBooks Online Accounting: Creating Proper Invoices
- Amazon to QuickBooks Online Accounting: Handling Refunds and Returns
- Amazon to QuickBooks Online Accounting: Recording Reimbursements
- Amazon to QuickBooks Online Accounting: Processing Settlements and Bank Deposits
