Taxing a portion of each line item

May 26, 2006 3 Replies
K

When we do new construction for clients we are supposed to charge sales tax on materials but not on labor. It is difficult to separate out labor from material, especially when we sub out work. Our accountant has said we can charge sales tax on 45% (or 55%?) of each line item... Can I do this with quickbooks?



Line Item 1 $100 tax Line Item 2 $500 tax Line Item 3 $250 non-tax Sub-total: $850 Taxable items: $600



45% of taxable items (materials): $270 Sales tax (on $270): $22.28 Total: $872.28

Is there any way I can do this automatically with QB? Maybe to have a new code, Tax, Non and 45% (new)?



Thanks in advance.


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!

The only way to would be a new tax code with a rate that is 45% of the standard rate. Using your example, applying a tax rate of

3.71333% to $600 will give you tax of $22.28. However, I don't know how this will affect the way you prepare your tax reports.

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G

In most places, unless you seperate the labor from the materials line by line, you are required to tax the entire amount. Yes it's a lot of work. That's frequently why it isn't done on subcontractors work. Oh, and don't forget if the subcontractor charged you sales tax on the materials that is a credit on your sales taxes. You have to watch for subs who are charged taxes by their suppliers too!

Have a quality talk with your accountant, before the auditor comes knocking.

GCG

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Double check with your accountant.

Don't know your state. In my state the rule is that if the invoice is not broken down into separate labor and materials, the entire invoice is taxed.

It's different for subs. Are you providing services for another contractor? Or are others subbing for you.

As to having QuickBooks automatically tax on a percentage of an item, no. You can, of course, create a taxable rate that is 45% of your states taxable rate.

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