QBO Tax Setup and Compliance 1 — Questions and Answers
Question 1: Where do you configure automated sales tax in QuickBooks Online?
- Accountant menu > Tax Center
- Taxes menu > Sales Tax (Correct answer)
- Account and Settings > Tax Preferences
- Reports menu > Tax Reports
Correct answer: Taxes menu > Sales Tax
Sales tax is configured and managed from the Taxes menu under the Sales Tax section in QBO.
Question 2: What two pieces of information does QBO's automated sales tax engine use to calculate tax on a transaction?
- Customer's email and industry
- Customer's shipping address and the taxability of the product or service (Correct answer)
- Company's ZIP code only
- Vendor's address and item weight
Correct answer: Customer's shipping address and the taxability of the product or service
QBO combines the customer's location and the item's taxability status to determine the correct sales tax rate.
Question 3: What does marking a product or service as 'taxable' tell QBO to do?
- Apply the highest available tax rate automatically
- Apply the applicable sales tax rate when that item is sold to taxable customers (Correct answer)
- Exempt the item from all taxes
- Create a separate tax line in all reports
Correct answer: Apply the applicable sales tax rate when that item is sold to taxable customers
Marking a product as taxable instructs QBO to calculate and add sales tax when that item is sold.
Question 4: Which QBO feature provides a filing workflow to calculate and prepare sales tax returns?
- Automated Payroll Filing
- Sales Tax Center filing workflow (Correct answer)
- Tax Form Library
- Intuit e-file desktop tool
Correct answer: Sales Tax Center filing workflow
The Sales Tax Center includes a filing workflow that calculates tax owed and guides you through preparing returns.
Question 5: How do you mark a customer as sales tax-exempt in QBO?
- Delete their shipping address
- Set their tax status to Exempt in their customer profile (Correct answer)
- Apply a 0% rate manually to every invoice
- Use a journal entry to reverse tax charges each month
Correct answer: Set their tax status to Exempt in their customer profile
Setting the Tax info field to Exempt in the customer's profile prevents QBO from calculating sales tax on that customer's transactions.
Question 6: In QBO's sales tax setup, what does a 'tax agency' represent?
- A third-party accounting firm
- The government entity to which collected sales tax is remitted (Correct answer)
- A payroll tax processing service
- A report that calculates federal income tax
Correct answer: The government entity to which collected sales tax is remitted
A tax agency in QBO represents the state or local taxing authority that receives your collected sales tax.
QBO Tax Setup and Compliance 1
Where do you configure automated sales tax in QuickBooks Online?