is your company required to charge some kind of federal sales tax
in addition to the normal state sales tax that you would have to charge your customers
well then you should watch this video carefully how to record collect and pay federal sales tax
if you have any questions about this topic you can leave them in the comments section below and
i'll do my best to help you and of course if you feel the video helped you i hope you will
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federal sales tax is an example of an out of scope sales tax this means that it is not on
the preset list of sales tax agencies provided by quickbooks online it means you cannot use
the sales tax center for this and you must record this type of sales tax the old-fashioned way that
means that you have to set it up yourself and the on the list of products and services as a
sales tax item and you also will have to do the calculation for how much to collect on the sale
by yourself some products such as alcohol tobacco firearms and luxury items that cost
more than ten thousand dollars are subject to a federal sales tax known as an excise tax
this is a tax that behaves like all other sales tax we discussed it is collected by the merchant
and paid to the government in blocks of time that are called sales tax periods so how do we deal
with an out-of-scope sales tax well we have to set up an item on the list of products and services
we have to create a current liability account in the chart of accounts to represent the amount owed
to the out of scope agency when you have a sale like you're making an invoice or a sale receipt
and need to charge this tax you simply add it to the invoice or the receipt right at the bottom
so there are two issues with dealing with out of scope sales tax first you must calculate the
amount yourself each time you make a sale and you must keep track of the due dates yourself
to remember when to send in the tax at the correct time and if you could have a separate software for
this to do both of these like excel you could set it up and it could still be very convenient
there are apps that will help you with both and i recommend using excel for both of those two issues
so how do we set up the out of scope sales tax first let's add federal excise tax payable
to the chart of accounts it's a current liability so we already know how to do that we click
accounting chart of accounts in the top right we click new and then the type will be other
current liability and the detail type can be uh you could leave it as federal income tax payable
or you could leave it as sales tax payable but the name will be federal excise tax payable
and click save and close now we have to add the irs to the vendors list
no problem expenses vendors ad vendor manually and then the name will you can just put
for this example and click save good now let's make an item called federal banana tax
and we'll make it payable monthly and it'll be 1.1 percent of the price of bananas and it will be
additional to the state sales tax now these last two points monthly and 1.1 percent additional two
those are things you have to keep track of in excel but we can add the item to the items list
we click the cog wheel go to all lists products and services now this we're going to put as a
non-inventory part so we click new and we click non-inventory part
federal banana tax and of course this is not taxable because we don't want to calculate
a tax on the item we're putting for tax so this is a tax item not a regular item that
you'll calculate regular sales tax from so put it as non-taxable and the account
that it is connected to is the account we just created federal excise tax payable
save and close now we're all set up and ready to go this is our out of scope sales tax example
let's do three quick sample transactions to record the sales tax and the only difference
is that it will not appear in the sales tax center but the results will appear on the trial balance
so let's imagine on july 11th of 2020 we sold five bananas to betty in
massachusetts okay so we click new we'll make them all invoices by the way invoice
betty okay bananas five now wait it's very important that we put the date the date will be a
very important point in this video july 11th five bananas now she's in massachusetts or at least the
transaction says she's in massachusetts so we need in this case to put it based on location because
betty is in massachusetts however in addition to this tax we need to go to the next row
and choose the federal banana tax okay missing an n there but don't worry about it and
of course the quantity is one we don't make it taxable and we have to calculate it ourself
and because it's one point one percent i happen to know that one point one percent
of five thousand dollars in america is fifty five dollars make sure that this is not taxable so it
doesn't mess up the original state sales tax from massachusetts so after this transaction
we will have 312 dollars more in the massachusetts state tax and 55 dollars more
in the federal uh tax excise tax payable save and close okay now when we go to the sales tax center
we see nothing because this is one that we created ourselves but when we click reports trial balance
you can see federal excise tax payable shows up for the first time as 55
and the massachusetts tax includes the 7-eleven sale that we just made here it is
7-eleven sale and in the massachusetts tax it was the amount that the invoice told us a moment ago
what about this july 22nd six bananas to allen in maine no problem so we click new invoice
alan the date was july 22nd both in july again it was bananas okay and it was six of them now those
six bananas are taxable to the state of maine so we come down here we choose main sales tax rate
and then click see the math to make sure that it calculates it so 330 dollars will go to maine's
sales tax whether we charge federal tax or not but below this we add federal banana tax and i
happen to know that in america one point one percent of six thousand is sixty six dollars
okay now we do not click the check mark because then the state tax will factor in this 66 dollars
this is separate from the state tax so this is the total amount that they have to pay
6 three ninety six we click save and close and again it does not show up oh well the uh well
this is massachusetts so if we click reports trial balance you can see federal excise tax payable if
you double click the number it now includes both of the sales that we included federal excise tax
and we now owe 121 dollars to the federal government if we click reports trial balance
and we go to main double click we can see that the 66 dollars or um alan the 330 for the main
sales tax for the july uh 22nd uh sale is in the main sales tax the way it would normally be
now august 15th sold seven bananas to martha many state no problem new invoice
martha many state and we said this one was august 15th very important point
bananas and it was how many seven seven bananas and we know that the bananas are taxable
but the next line we have to put the federal banana tax and we do not click the check mark
because we don't want the normal sales tax to be messed up or include the federal tax so i happen
to know that one point one percent of seven thousand dollars in america is seventy seven
dollars and click see the math just to make sure it calculates everything correctly
and this is the amount that martha many state has to pay for this sale we click save and close
and go back to reports trial balance now you can see the federal excise tax payable
is up to 198 dollars and how do we know how much to pay well you use the trial balance
and the transaction report for the liability account in order to determine how much to pay
for a specific period of time and what you would do is you would change the to and from dates in
that report so that you could isolate the specific amount of federal tax owed for a particular period
so now let's pay what we owe just for july so if we look at the federal excise tax payable
it says that the total that we owe right now is a hundred and ninety eight dollars but we don't
know how much of that is owed specifically for the month of july but if we double click you can see
clearly that these two were sales during july so they are taxable and we should send them in
the the money amount for july and this last one was done in august so july's money is due in
august and august money is due in september and so on but the way to make sure that you know that
is to click here and click custom if you click custom you can set a from date in our example
it will be july 1 to july 31 because again in our example we're imagining it's monthly
then click run report now when you run the report after isolating the specific month of the sales
the balance should only include sales for that month which means the balance of the federal
excise tax payable should be for that specific time range should be the amount you send in during
august or during the next month so let's send that in on august 20. click new
check and of course the payee is the irs you