Refunds and Sales Tax in Quickbooks

Most of us are not using 100% of the power of the software at our fingertips.  You probably use about 10% of Word’s functionality, maybe 15% of Excel if you’re experienced.  If you are using Quickbooks, you may not know all the tricks, but you have to know how to process a refund.

When you are using the invoice tool, you create an invoice using items from the products/services list.  Each item has a field which tells Quickbooks whether to include sales tax or not.  When you issue a refund, if the original invoice had sales tax, then you need a refund item which is also taxable, but when you use it, you have to put a minus to get it to subtract.  You’ll also need a category in your chart of accounts called refunds, but remember to put it in the income category so you can see your top line revenue minus refunds.

If the original invoice was a wholesale invoice with no sales tax, then you’d need to use wholesale refunds as the item in the invoice and have that be a non-taxable item, which also flows to the same refunds category in the income section of your chart of accounts.  This part is the same for both.

If you’re at all confused by this, book a free consultation so we can discuss it with you by phone.