Understanding Sales Tax for Small Businesses: QuickBooks Online
Struggling with sales tax for your small business or e-commerce store? Understanding how to calculate, collect, and remit sales tax in QuickBooks Online and Shopify doesn’t have to be confusing. Our expert guide answers the most common questions to help you stay compliant and save time.
In this video Katherine Bunschoten, CEO & Founder of Certum Solutions in Monroe, North Carolina, goes over how to do just that. Today, we’re diving into a topic many small business owners and e-commerce sellers frequently ask about: sales tax. We’ll cover what it is, how it’s calculated, and why it can differ depending on your state and situation. Spoiler alert: the answer is both simple and complicated, it really depends on your circumstances.
Certum Solutions offers FREE 30 min consultation for your Sales Tax Needs, book yours today!
What is Sales Tax?
Sales tax is what’s known as a trust tax. Essentially, the customer pays the tax, and as a merchant, you’re responsible for collecting it and remitting it to the government. Think of it like withholding tax for employees—the money is not yours, you’re just holding it temporarily to pass along to the proper tax authority.
When you sell products or services online, whether through Shopify, QuickBooks Online, or another platform, sales tax reporting becomes crucial. If you see payment fees deducted from your deposits, don’t assume these are taxes—platforms like Shopify do not automatically remit your sales tax unless you use a third-party app like Avalara or another automated sales tax management tool.
Sales Tax Collection in E-Commerce
When you sell through Shopify, a point-of-sale system, or any e-commerce platform, the system will collect sales tax from your customers. However, it’s up to you to remit those funds to the proper state or local tax authority according to their filing schedule.
Sales tax laws vary by state. For example, some states may exempt construction materials or certain services. Staying compliant often requires referencing your state Department of Revenue guidelines or using specialized software to handle complex rules, especially with economic nexus considerations for multi-state sales.
Setting Up Taxable Items in QuickBooks Online
Regardless of where you operate, it’s important to mark each product or service correctly in QuickBooks Online as taxable or non-taxable. Here’s a quick overview:
Navigate to Products and Services in QuickBooks Online Advanced.
Select the item you want to edit.
Choose whether it’s taxable or non-taxable.
Remember: taxability is generally based on where your customer is located, not where you are.
For instance, if you’re in North Carolina but ship a product to California, the California sales tax rules apply. If a customer doesn’t pay sales tax, they may be responsible for self-reporting it to their state.
Understanding Nexus
Nexus determines whether your business has a sufficient presence in a state to require collecting sales tax there. Nexus rules vary by state and can depend on the number of transactions or total sales. If you’re unsure whether you meet nexus thresholds, consult your accountant or a sales tax specialist.
Using QuickBooks Online for Sales Tax Reporting
QuickBooks Online helps you:
Track which items are taxable.
Categorize items for proper reporting.
Generate Sales Tax Liability Reports and other useful filings.
Always double-check the accuracy of your reports, including shipping addresses and tax settings. Remember: “trash in, trash out”—accurate input is key.
You can file directly through your state’s online system. For example, North Carolina has a streamlined online process. However, filing processes differ by state, so always verify requirements.
Shopify Sales Tax Reports
If you sell on Shopify:
Go to Analytics → Reports.
Look for the Sales Tax Report.
Review collected taxes by state and ensure proper remittance.
Integrations like Shopify + QuickBooks Online can centralize sales tax data, ensuring both systems reflect accurate balances for accounting and tax purposes.
Tips for Small Business Owners
Confirm each item’s taxability with your accountant or state revenue guidelines.
Know your filing schedule: weekly, monthly, quarterly, or annually.
Consider third-party software for multi-state or high-volume transactions.
Always review reports from multiple angles—profit and loss, sales tax liability, and platform reports—to ensure accuracy.
At Certum Solutions, we help small businesses streamline their sales tax management, Shopify accounting integration, and QuickBooks Online setup. If you have questions or need guidance on sales tax compliance, filing, or reporting, our team is ready to help.
Thank you for reading, and we look forward to helping your business stay compliant and efficient.
Certum Solutions offers a FREE 30 min consultation, book yours today
Office: 980-210-6946
Sales Tax FAQ for Small Businesses: QuickBooks Online & Shopify
1. What is sales tax and who pays it?
Sales tax is a trust tax collected from your customer and remitted to the state. As a merchant, you’re responsible for collecting and sending these funds to the proper tax authority. The money is not yours—it belongs to the government.
2. How is sales tax calculated?
Sales tax is usually calculated based on the customer’s location, not your business location. Rates vary by state, county, and city. Some products or services may be exempt depending on state rules. Platforms like QuickBooks Online and Shopify can automatically calculate sales tax when configured properly.
3. Do I need to collect sales tax in every state I sell to?
Not always. You only need to collect sales tax in states where you have nexus, meaning a significant presence or threshold of sales. Nexus rules vary by state, and using multi-state sales tax software can simplify compliance.
4. How do I set up taxable items in QuickBooks Online?
Go to Products and Services.
Select an item to edit.
Choose Taxable or Non-Taxable.
Ensure settings reflect the customer’s location for accurate tax reporting.
5. Does Shopify remit sales tax for me?
Shopify collects sales tax from your customers, but it does not automatically remit it unless you use a third-party app like Avalara or another automated sales tax solution. Always verify collected taxes and remit to the appropriate state agency.
6. What is a sales tax liability report?
A Sales Tax Liability Report shows how much sales tax your business has collected and owes. In QuickBooks Online, you can generate this report to confirm your numbers before remitting payments.
7. Can I file sales tax online?
Most states allow online filing. For example, North Carolina has a streamlined online system. Filing frequency (weekly, monthly, quarterly) depends on the amount of tax you collect and your state’s rules.
8. How do I stay compliant with sales tax?
Track all taxable and non-taxable items accurately.
Monitor nexus thresholds in each state.
Use accounting or e-commerce platforms like QuickBooks Online or Shopify integrations for reporting.
Consult a CPA or tax advisor for complex situations.
9. What is the difference between sales tax and use tax?
Sales tax is collected at the point of sale by the seller. Use tax is paid by the customer when sales tax was not collected, often for out-of-state purchases. Both must comply with state rules.
10. How can I simplify multi-state sales tax?
Use third-party software like Avalara, TaxJar, or similar platforms to automate calculations, reporting, and remittance. Integrations with QuickBooks Online or Shopify help centralize data for accurate filings.