# Once I know where I’m required to collect sales tax, how should my books track taxable and exempt sales and sales-tax liabilities by jurisdiction so I can prepare and reconcile the required returns?

Applies to: United States · Updated 2026-09-28

Start from the states where you already know you must collect. For each jurisdiction and filing period, the books should produce gross sales, taxable sales, exempt sales with their reason, marketplace-collected sales, tax collected and any local detail required. Put taxability on items and customers and the selling and delivery or pickup locations on every sale, keep the liability separable by jurisdiction, add rate and jurisdiction changes with effective dates instead of editing, and keep each filed period's support.

## What must the books produce for each return?

This starts once you know the states, and any local jurisdictions within them, where you must collect and file; whether a state's rules create an obligation is a separate question.

Each state writes its own return, so work from the current instructions for every return you file. New York's instructions for Form ST-100, its quarterly return, show the kind of figures involved:

- **Gross sales.** Box 1 takes total taxable, nontaxable and exempt sales from your New York business locations and from locations outside New York delivered into the state, not counting sales tax or sales from Form ST-100.10.
- **Nontaxable sales.** Box 1a takes all sales not subject to tax, whether or not an exemption document was required.
- **Taxable sales by jurisdiction.** Taxable sales are reported for each New York jurisdiction where delivery occurred.
- **Purchases subject to tax.** Column D takes them for the jurisdiction where each was used, such as property and services used in your New York business with no New York State tax paid.
- **Credits.** Credits that can be identified by locality, such as tax on canceled sales, returned merchandise and bad debts, go on that locality's line.

Restated as outputs, the books must produce these for each jurisdiction and filing period, so no figure is rebuilt in a spreadsheet with no link back to the books:

- Gross sales, excluding the tax itself
- Taxable sales, split by every local code the return uses
- Untaxed sales, split by reason, with marketplace-collected sales kept apart
- Tax collected, and tax computed on taxable sales at each rate
- Credits for returns, cancellations and bad debts, by original jurisdiction
- The liability balance for that jurisdiction

Say which basis each figure is on. Intuit's sales tax liability report page says credit memos and refund receipts reduce its gross total, so where a figure you take from that report already reflects a credit memo, do not claim it again as a credit. List separately only credits the report has not netted, such as a bad debt written off by journal entry, under the original sale's jurisdiction. New York's ST-100 also takes purchases subject to tax; recording and self-assessing that tax is a separate question.

## Which ledger structure should carry the jurisdiction?

Three structures can carry the jurisdiction; the comparison below is a practical one, not a rule:

| Structure | How the return figures come out | What fails first |
|---|---|---|
| Separate liability account per jurisdiction | Each liability is its own balance; sales splits depend on item and customer setup | Accounts multiply with every state and local code; a posting to the wrong account stays hidden until reconciliation |
| One liability account plus a tracking dimension, such as class or location | The jurisdiction comes from a tag on each transaction | Untagged lines, and systems that cannot split balance-sheet balances by that tag |
| The system's own tax agencies, rates and codes | The tax engine records the jurisdiction on each taxed line and reports by it | Master data: a wrong item category, customer status or address gives a wrong figure silently |

Intuit's help page on running a balance sheet by class or location says you can't filter the balance sheet by class in QuickBooks Online, though you can filter it by location, so a class tag alone cannot show a per-state liability there. The same page says receivables, payables and payroll can show amounts under Not specified because related transactions can't be split by location, so check that column before relying on a location-filtered liability. Intuit's page on the sales tax liability report says tax info is separated into state, city and county, and the report shows gross sales, taxable and non-taxable amounts, and the tax charged.

As a rule of thumb, choose the lightest structure that produces every output:

| Your situation | Proportionate structure |
|---|---|
| One state, state-level figures only | The system's tax mechanism with one agency, or one liability account; no tracking dimension |
| One state whose return asks for local detail | The system's tax mechanism, so each sale carries its local code; one liability account is still enough |
| Several states | The system's tax mechanism, one agency per state, local codes only where a state asks, and a liability account per state unless the system's own documentation shows each agency carries its own balance |
| A system whose tax mechanism is missing or cannot report a return's local detail | A liability account per state, plus a jurisdiction code on every taxed line |

With more than one return to file, one undifferentiated liability account shows no balance for any single return, so each return's share must be rebuilt from transaction detail. The general choice between separate accounts and tracking dimensions is a separate question.

## How do items, customers and locations make the split fall out of ordinary sales?

Three kinds of master data must be right before a sale is recorded:

- **Items.** Intuit's page on how QuickBooks Online calculates sales tax says that, depending on the state, products and services are taxable at the standard rate, nontaxable, or have special rates or fees. Give each item a taxability category, not a fixed rate.
- **Customers.** Each exempt customer carries its reason, as the next section explains.
- **Locations.** The same Intuit page says QuickBooks calculates sales tax automatically based on the shipping address, and that in origin-based states the calculation is based on where the seller is located. Intuit's page on setting up where you collect sales tax in QuickBooks Online with automated sales tax says QuickBooks uses your business address as the sale location on your next invoice or sales receipt, and that you can manually change the sale location for individual transactions, so check that every shipped sale carries its ship-to address.

Which location decides the jurisdiction is a state rule. Washington's undated Department of Revenue page on determining the location of a sale says collection is based on where the customer receives the merchandise or service. For most retail sales, Washington's ordered rules say a customer taking possession of a product, digital good, retail service or extended warranty at your business location is taxed at your location's rate, and one receiving it elsewhere is coded to where it is received; check that page for sales it codes differently. Further rules, applied in order, cover an unknown receiving address, starting with the customer's address in your business records unless that is done in bad faith. New York's Tax Bulletin ST-770 on recordkeeping says that when products are delivered elsewhere you must keep records that prove where delivery took place.

Each sale should therefore carry the selling location, whether it was picked up or delivered, the delivery address and the jurisdiction code assigned when recorded. Recording the tax on each sale and building the products list are separate questions.

## How should an untaxed sale be recorded so it can be reported as exempt?

Intuit's page on how QuickBooks Online calculates sales tax says that when you mark a customer tax exempt you select a reason from the Reason for exemption list, and that QuickBooks may still need to calculate tax for these customers in certain scenarios.

The reason matters because Intuit's page on the sales tax liability report lists several ways a transaction becomes non-taxable: a sale to an exempt customer, tax not selected on the sales form, or a product or service marked as non-taxable. A sale where someone cleared the tax box lands in the same column as a documented exempt sale.

Record each untaxed sale through one of these routes only:

- **Exempt customer.** Mark the customer exempt with its reason, and hold the document the state requires.
- **Exempt sale.** Where the exemption covers one sale rather than the customer, mark that sale or line exempt with its reason and link it to that sale's certificate.
- **Nontaxable item.** Use an item whose category is nontaxable in that jurisdiction.
- **Marketplace-collected.** Flag the channel, as described below.
- **Outside your obligations.** Keep the selling and delivery locations on the sale. It carries no tax, but still counts in the gross and nontaxable sales of a return that takes sales from your selling location, such as New York's Form ST-100.

Before each return, list sales with no tax that fit none of these five routes, and correct each one. New York's ST-770 says you must be able, through your records, to connect an exempt sale to a particular purchaser and to the exemption certificate you have on file for that sale or purchaser. California's Publication 73 says your records must show gross receipts from all sales or leases of tangible personal property, including ones you may consider exempt, and all deductions claimed in filing returns. What to obtain from exempt customers is a separate question.

## What if a state's return asks for local detail?

Capture local detail when the sale is recorded: it cannot be rebuilt reliably from sales that carried only a state. New York's ST-100 instructions report each jurisdiction in columns for the taxing jurisdiction and its code, with the period's tax rates printed on the return. Washington's undated Department of Revenue page for marketplace sellers says to enter each direct sale by location code.

Where a return needs local detail, keep one liability per state and let the tax engine hold the local code on each line, rather than opening a liability account per local code.

## How do filing calendars that differ from the book period fit?

Each obligation keeps its own calendar. New York's Tax Bulletin ST-275 sets quarters of March through May, June through August, September through November and December through February, and an annual period of March 1 through February 28/29. It says that if a quarterly filer's total tax due for the four most recently filed quarterly periods is $3,000 or less, the Tax Department may reclassify it as an annual filer. It also says that if your taxable sales and purchases subject to use tax reach $300,000 or more in any quarter, you must begin filing monthly returns from the first month after that quarter. California's Publication 73 says a new permit holder is instructed to file on a monthly, quarterly, quarterly prepay, fiscal annual or annual basis.

In QuickBooks Online with automated sales tax, Intuit's page on setting up where you collect has you select how often you file for each agency, enter a start date, and choose a reporting method, either cash or accrual.

Three things follow from that:

- **Dates.** Run each return's reports on that state's period dates, never on the book month or quarter. A calendar-quarter close does not line up with New York's March-to-May quarter.
- **Timing basis.** California's Publication 73 says you must report a sale for the tax reporting period in which it occurs, even if you receive payment in a different period, but that lease payments are generally reported in the period received and unpaid lease balances are not, with different rules for trucks, aircraft and other mobile transportation equipment.

  Cash-basis books cannot feed that return by payment date: produce its figures by sale date, or set that agency's reporting method to accrual. If you lease property in California, produce lease figures by the period payment is received, not by invoice date, except for mobile transportation equipment. Where a state lets you report on a cash basis and you do, each sale reaches the return in the period its payment arrives, so an invoice unpaid at period end is reported once, when collected.
- **Changes.** When your frequency changes, whether by state notice or because your figures cross a state threshold, change that agency from the first new period and leave filed periods as they were.

## How are sales on which a marketplace collected the tax handled?

Each state sets how these sales enter your own return, and California and Washington both keep them in your figures:

- **California.** The CDTFA's undated Tax Guide for the Marketplace Facilitator Act says a marketplace seller that is required to be registered must continue to report total sales on its returns, including sales facilitated through a marketplace owned, operated or controlled by a facilitator that is registered or required to be registered with CDTFA. It says that beginning October 1, 2019, the seller may claim a deduction, as "other", for sales facilitated by marketplace facilitators. It also says you should obtain and keep documentation that the facilitator is responsible for collecting, reporting and paying the tax, such as an agreement indicating it is registered with CDTFA as a retailer.
- **Washington.** The Department of Revenue's undated marketplace sellers page says to report gross Washington retail sales on the State Sales and Use page and take a deduction for facilitated sales. Marketplace sales are not entered in the location-code detail, because they are deducted automatically.

In the books, record these sales with a flag showing the channel collected the tax, so they count in gross sales, stay out of taxable sales you collected on, never credit your liability and form their own deduction line. Leaving them out of the books makes recorded sales disagree with the channel's statements and with the total sales these returns expect. Recording the sales themselves is a separate question; check any other state's instructions for its treatment.

## How do you produce the return-support pack and reconcile it?

Produce the pack from the books, in this order:

1. Run the tax report for one agency and the state's return period, on the timing basis that state requires.

   Intuit's sales tax liability report page says transactions that aren't sales forms, such as bank deposits and journal entries, are left off that report. Add any sales recorded that way, such as channel-collected sales booked from a payout, to gross sales and their untaxed reason before tying back to revenue.
2. Run the transaction detail behind each figure, grouped by jurisdiction code and by the reason a sale was untaxed.
3. Tie each figure back as the table below shows.
4. Investigate every difference and correct it in the current period, not by editing a filed period.
5. Save the pack as run, with its agency, date range, basis and run date, before filing.

Each output, for one jurisdiction and one period, ties back like this:

| Output | Tie-back |
|---|---|
| Gross sales | Revenue accounts for the same dates, filtered by selling and delivery location to the sales that return's gross figure counts, with the transaction list |
| Taxable sales by local code | Transaction detail by code, where each line's tax equals its taxable amount times that code's rate, within rounding |
| Exempt and nontaxable sales by reason | Exempt customers with reasons, single exempt sales with reasons and certificate links, nontaxable items, and an empty list of unexplained zero-tax sales |
| Marketplace-collected sales | The channel flag in the books and the channel's own statements, plus, for a California deduction, the facilitator documentation |
| Tax collected | Tax posted to that jurisdiction's liability from sales for the period, after setting apart any purchase-side tax in the same account |
| Credits for returns and bad debts | Credits in the period that the report has not netted, such as write-offs, under the original sale's code |
| Liability balance | Opening balance, plus tax posted from sales and any purchases, less tax reversed on returns, cancellations and bad debts, and payments, equals the closing balance |

An invented example for one state's quarter, on sale-date timing: gross sales are 48,000.00, made up of 35,000.00 taxable, 5,000.00 exempt sales for resale, 2,000.00 nontaxable items and 6,000.00 sold through a marketplace that collected the tax. Taxable sales split into local code A, 20,000.00 at 8%, and code B, 15,000.00 at 7%, so computed tax is 1,600.00 plus 1,050.00, or 2,650.00. The liability account shows 2,662.00 collected, 12.00 more than computed, so trace the difference to the sale lines before filing. New York's ST-100 instructions say you must remit with your return the total amount you collected as tax, even if it is more than the tax due. In any other state, check its return instructions on tax collected above the tax due before treating a difference as rounding.

If the account opened the quarter at 2,480.00 for the prior return and that return was paid during the quarter, it closes at 2,480.00 plus 2,662.00 less 2,480.00, or 2,662.00. If an agency reports on a cash basis, check the system's documentation for how its report and the liability account treat unpaid invoices before reconciling the two.

Tying the liability to the return as filed, and clearing it when paid, is a separate question. This reconciliation checks figures only: it does not confirm where any payment goes, and a message asking you to pay to new or changed details needs verifying before anything is paid, also a separate question.

## What changes when a rate, code or boundary changes part-way through a period?

Add a new rate or code effective from the date the state sets, and keep the old one for sales that the state's rules leave under it. Editing in place is the trap: Intuit's page on editing sales tax rates in QuickBooks Online says a change to your tax rate applies to all future transactions, even ones dated before the change, but not past ones. A sale dated before the change but entered after an in-place edit then takes the new rate. Where the system maintains rates itself, check that its report shows the old and new rates on separate lines across the change.

Taxability changes the same way. New York's ST-100 instructions announce a Chemung County local tax exemption on residential energy sources and services, through November 30, 2026, effective June 1, 2026, and say transitional provisions may apply, pointing to Tax Bulletin TB-ST-895, Transitional Provisions for Sales Tax Rate Changes. Read the state's transitional provisions before you code sales around a change, and split the codes the way they direct, so the report for any period that straddles the change shows each treatment on its own code line. Make the old code inactive only after the last return that uses it is filed.

Boundary changes follow the same rule: keep the jurisdiction code on each sale as assigned when it was recorded, rather than re-deriving it later from an updated address table.

## How do you add a new state part-way through the year?

Treat the new obligation as an extension with an effective date, not a restructuring:

1. Take the obligation's start date from your work with that state, not from the books.
2. Add the agency, or the liability account and codes, with that start date, the state's filing frequency and the timing basis it requires.
3. Check that every item has a taxability category for the new state and that customers there have delivery addresses.
4. Record sales from the start date on with the new state's code, and leave earlier sales exactly as recorded.

Leaving earlier sales as recorded keeps returns already filed elsewhere reproducible. Ask the new state's revenue agency or an adviser whether earlier sales create any obligation there. The new state's reports, and its comparisons, begin on the start date. If sales on or after the start date were recorded before the agency existed, confirm with that state how they are to be reported before changing them.

## What should you keep so a filed return can be reproduced?

States set what records must show. California's Publication 73 says you must keep records necessary to determine the correct tax liability, such as the normal books of account, documents of original entry and all schedules or working papers used to prepare your tax returns, so that CDTFA can verify the accuracy of returns. New York's ST-770 says you must keep records of every sale, the amount of the sale and the sales tax on it. New York's ST-100 instructions also say to keep a copy of your completed return.

For each return filed, keep this set together:

- The return as filed
- The saved report pack
- The transaction detail export behind each figure
- The reconciliation and every adjustment made before filing
- For a return claiming California's marketplace deduction, the facilitator documentation

Then leave the filed period alone. Record a later refund, cancellation or bad debt when it happens and claim it as the state's return provides, and correct a filed figure that proves wrong the way that state provides, not by silently editing old transactions. The same set shows how each filed figure was produced if a return is later examined. It sits alongside, and does not replace, the underlying records each state requires, such as California's documents of original entry and New York's true copy of each sales document. How long to keep it is set by each state.

## Sources

1. Intuit Inc. — *Set up where you collect sales tax*, last updated 8/3/2026. https://quickbooks.intuit.com/learn-support/en-us/help-article/sales-taxes/set-collect-sales-tax-quickbooks-online/L1Nu6wYj7_US_en_US
2. New York State Department of Taxation and Finance — *Instructions for Form ST-100, New York State and Local Quarterly Sales and Use Tax Return*, ST-100-I (6/26). https://www.tax.ny.gov/pdf/current_forms/st/st100i.pdf
3. Intuit Inc. — *Run a balance sheet by class or location in QuickBooks*, last updated September 8, 2026. https://quickbooks.intuit.com/learn-support/en-us/help-article/balance-sheet/run-balance-sheet-class-location/L2wj2NQT2_US_en_US
4. Intuit Inc. — *Understand the sales tax liability report in QuickBooks Online*, last updated August 5, 2026. https://quickbooks.intuit.com/learn-support/en-us/help-article/sales-taxes/understand-sales-tax-liability-report-quickbooks/L3wP24Uyb_US_en_US
5. Intuit Inc. — *Learn how QuickBooks Online calculates sales tax*, last updated August 4, 2026. https://quickbooks.intuit.com/learn-support/en-us/help-article/sales-taxes/learn-quickbooks-online-calculates-sales-tax/L8VWCLobK_US_en_US
6. Washington State Department of Revenue — *Determine the location of my sale*, undated. https://dor.wa.gov/taxes-rates/sales-use-tax-rates/determine-location-my-sale
7. New York State Department of Taxation and Finance — *Recordkeeping Requirements for Sales Tax Vendors (TB-ST-770)*, updated March 12, 2026. https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/record-keeping_requirements_for_sales_tax_vendors.htm
8. California Department of Tax and Fee Administration — *Your California Seller's Permit (Publication 73)*, January 2026. https://www.cdtfa.ca.gov/formspubs/pub73.pdf
9. Washington State Department of Revenue — *Marketplace sellers*, undated. https://dor.wa.gov/taxes-rates/retail-sales-tax/marketplace-fairness-leveling-playing-field/marketplace-sellers
10. New York State Department of Taxation and Finance — *Filing Requirements for Sales and Use Tax Returns (TB-ST-275)*, updated June 4, 2026. https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/filing_requirements_for_sales_and_use_tax_returns.htm
11. California Department of Tax and Fee Administration — *Tax Guide for Marketplace Facilitator Act*, undated. https://www.cdtfa.ca.gov/industry/MPFAct.htm
12. Intuit Inc. — *Edit sales tax rates*, last updated 8/24/2026. https://quickbooks.intuit.com/learn-support/en-us/help-article/memorize-transactions/edit-sales-tax-rate-quickbooks-online/L7ivW6TDz_US_en_US

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