does your company have non-taxable customers or even non-taxable products or services
well then you need to learn how to record non-taxable customers and products
if you have any questions about this topic you can leave them in the comment section below and i'll
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some customers or clients may be exempt from our requirement to charge and collect sales tax there
could be many reasons for that some products or services we sell may also be non-taxable
you must check the rules from your own states tax department in order to determine who may be
eligible for non-taxable sales and which products or services you may indicate as non-taxable for
sales tax purposes for example let's imagine that apples are now non-taxable for sales in
massachusetts well that's very simple we would have to open the list of products and services
and change the status from taxable to non-taxable for that specific item we click the cog wheel
and go over to products and services now we select apples by going to the row of apples and clicking
edit and if you scroll all the way down where it says sales tax category you can choose non-taxable
and then you click save and close and now watch what happens in our example
let's imagine on june 18th of 2020 we sold two apples and one banana to betty the payment was
directly deposited into your bank account which means this time we're going to make a sale receipt
instead of an invoice so what will be the result in the trial balance after we record
this sale receipt well we know the gross sales will increase by twelve hundred because one banana
is a thousand dollars and two apples are two hundred dollars however the tax will only be
based on the one thousand dollar banana and that's why the massachusetts sales tax will only increase
by 6.25 percent of the price of the banana because only the banana is taxable so even though the
wholesale is twelve hundred the tax is only sixty two fifty and of course the cash in the bank
would increase by the entire amount 1262.50 the sales price of everything plus the eligible tax
let's take a look how to record this sale receipt in the top left we click new and we go down to
sale receipt now we choose the customer betty boop and of course we put the date you have to
go back to june 18th of 2020 in order to make this work and we go down to the products and service
when we choose apples look what happens when we choose apples nothing but look what happens
when we choose bananas same thing one up let's make the quantity of apples become
two now watch if we click the check mark next to apple's no tax is calculated in the bottom right
but if we click the taxable check mark next to bananas you can see that after we go down and
click see the math that's a little explanation popping up that we can close but you actually
have to click see the math after you apply the tax now again watch the tax as you can see is 62.50
which is 6.25 of only the bananas not the apples and again if i remove the taxable
from the apples and click see the math to recalculate nothing happens but if i put that back
and i remove the tax from the bananas and again click see the math you see then the tax is removed
the tax only shows up when i choose the check mark next to the bananas and click see
the math and then close the explanation so that proves that even if it's checked off as taxable
it will not add to the sales tax as part of the transaction because we have already set apples
to be non-taxable in the products and service lists and of course when we click save and close
or actually we're not clicking save and send we're clicking save and close
so now when we go back to the sales tax center you can see we had said we have 62.50
currently accruing that we have not yet paid because this time period is set just showing
what's owed as of now november of 2020 and if you click reports and you custom reports trial balance
you can see that the cash on hand increased to the 1250 or increased uh by that amount
and became one thousand two hundred fifty uh because it was slightly negative it was negative
by like twelve dollars and fifty cents before that and of course massachusetts department of
revenue payable increase let's take a look at this payable account double click you can see
that only the 6250 was added on this date from this sale and if you click reports trial balance
and you click cash on hand you see cash was negative by twelve fifty and then we added
a positive twelve sixty two fifty that explains that number and of course sales just shows the
gross amount you double click it's just going to show you the sale amount of 1200 and not the tax
so that's the result when you make an item non-taxable now let's do example two
let's imagine that alan is no longer a taxable client so how do you handle that you click sales
you go over to the list of customers and will edit alan this is what you do you click the check
mark next to the customer you wish to edit and then double click their name when their specific
details come up as far as the list of transactions you then can click edit next to the customer name
and you will get back into the customer information window the tab to click is tax info
and what you can do is you can click the check mark here see i had already checked because i
was practicing but you have it unchecked so if you click the check mark this customer is
tax exempt now if you want you can choose one of the reasons why this customer is
tax exempt and you can fill in additional details if this information is not enough
but this little section is extra data the only important thing is clicking this check mark
and click save okay i guess we have to pick a reason it makes us so we choose other
you could choose whatever reason suits you in this situation but you have to put some so i click save
now we're ready for this transaction let's imagine on march 20 we sold two bananas and two
apples to allen same idea but look what happens when we uh actually does it say cash today
well let's assume it's cash today so two apples and two bananas to allen we click new sale receipt
be very careful of the date the date we want back on march 18th of 2020 and the customer is alan
now look we know that bananas are taxable as an item but notice if we click see the math
nothing happens even though we chose bananas that's because alan the customer is non-taxable
and of course apples are already non-taxable so it doesn't matter or we have to put two
but it doesn't matter if we click the check mark on both of them nothing will be calculated when
we click see the math because this customer is non-taxable save and close and when you
look at the reports you can see that nothing changed in the trial balance from a moment ago
even though the sales went up and the cash went up the tax due is the same look at the tax section
nothing changed here we still owe two dollars and fifty cents and nothing more because alan was
non-taxable but look what happens if we reopen that sale receipt and change it to betty look
what will happen in the tax center and the trial balance to find any transaction we click reports
open the trial balance we know that this is a sale receipt so it's in cash so we double click
and here's the date march 18th double click now look what happens in the bottom right
when we change alan to betty remember both items are checked off as taxable even though only the
bananas are taxable so we're going to change this to betty boop and scroll down and notice the tax
automatically changed to five dollars because we know that betty is taxable
and we know that only the two thousand dollars of bananas is taxable and that's why it calculated
a hundred and twenty five click save and close and now when we go to the tax center we can see that
for this current period we only owe 62.50 but if we reset the date range to include
all of the taxable transactions and click refresh now we have a a time period showing up here
that was past due as well as this being past due because it's including everything
regarding the sales date you have sales during this period that was due during july and sales
during this period that was due in april and you have sales in this period that were actually paid
and that's the result when you change taxable to non-taxable for customers or
items