Mike Branch's Blog About QuickBooks and Everything

This is Part 2 of the “QuickBooks Point of Sale for Bookkeepers” series, which I started about a hundred years ago. I’m finally getting back on track with this series, and now it’s time to talk about sales tax. This is specific to the great state of Washington (that’s the one between Oregon and British Columbia, for those of you on the east coast), but should be useful to anyone using QB POS. Note that in Washington it’s not necessary to use tax groups in QB, because all sales tax is paid to the state Department of Revenue.

To compensate for that little bit of convenience, the state has implemented destination-based sales tax and streamlined sales tax, meaning that you must track and report sales tax based on the location to which it is delivered, not the location from which it’s sold. There are over 350 tax locations in Washington, which can make this a bit of a chore.

Before I get into the details, I want to emphasize the importance of using QuickBooks’ and Point of Sale’s built-in functionality to track and report sales tax. If you are calculating tax based on your Profit and Loss report or sales reports, you’re doing way too much work. The sales tax reports and other features are located in “Sales Tax” under the “Vendors” menu in QuickBooks.

The first thing you’ll want to do is determine the correct tax vendor in QuickBooks, which is the agency to which you pay sales tax. Inevitably I find that new clients have 2 or 3 different vendors for this. I always search under “Department”, “Washington” or “State” to find them. If you have more than one, you should merge them and continue to use just that one vendor from now on. In Washington, I suggest using the name “WA State DOR”, since that’s the name given in the tax rate file that the state provides for importing into QB.

Now, download the QuickBooks Quarterly Tax Rate Table from the WA Department of Revenue web site and import it into QuickBooks. Backup your QuickBooks company file first. Do this quarterly. Here’s where to get the file. This file is a wonderful thing, but unfortunately it can only be imported into QuickBooks, not into Point of Sale. The rates set up in POS are the ones that determine the rate charged to the customer, not the rates in QuickBooks.

Unless you do a very large volume of shipping to customers throughout Washington state, you will probably not want to add all of the tax locations at once. Initially, you may want to add locations for your existing customers, or the first time you ship to a particular tax location.

To add a tax location in QuickBooks Point of Sale, make sure you have a connection with QuickBooks Financial. Edit the POS company preferences and click Sales Tax in the menu on the left:

1. First, make sure you have the necessary tax codes in POS. It’s good to have Tax, Non, and Svc so that service is reported separately from non-taxable retail sales. But that’s not necessary if you don’t perform services subject to state B&O tax. These codes will determine which columns are displayed on the QB sales tax reports, so choose whatever codes will assist you in your state tax reporting.
2. Click the button labeled “Add Tax Location” at the bottom of the list of tax locations.
3. For Tax Location Name enter the description that will go on the receipt. It’s a good idea to give it a location-specific name so you can tell the difference between locations with the same tax rate. For example, “Sales Tax – Sequim”. Check the box saying shipping is taxable, because it is, in Washington. Select “Tax” from the tax code drop-down. Click “OK”. Notice that all of the tax codes (Tax, Non, etc.) are replicated for each location that you create.
4. For each tax code where you expect to have sales under the new tax location (usually just “Tax”), click the “Edit Tax Code” button.
5. Do not modify the first form, “Enter Tax Code information”. This would affect that tax code for all locations. Click “Next”.
6. Under “Enter Tax Option information”, it’s usually sufficient to select “Single-rate tax” for Washington tax locations. Click “Next”.
7. Under “Enter Tax Rate information,” enter the tax rate as a percentage (e.g. 8.4). The name of the government agency to which you pay sales tax should exactly match the vendor name in QuickBooks (for example, “WA State DOR”).
8. Select the correct QuickBooks tax item from the drop-down list. This includes the list of tax items that you downloaded from the DOR web site. It’s in alphabetic order, mostly by county and/or city.
9. Select the QuickBooks Tax Code that matches the code you’re editing in POS (such as Tax or Non). Click Finish.
10. When done adding tax locations, click Save at the bottom of the “Set up Sales Tax” preference window.

Hope that helps. If you have additional questions about setting up sales tax and reporting in QuickBooks and Point of Sale, please email me at mikeb@whiterabbitservices.com.

Every so often I’ll get a call from a QB POS user whose receipt printer suddenly stopped working. Sometimes they report that their cash drawer isn’t working, but this is almost always due to the receipt printer not working, since the cash drawer is connected through the receipt printer. The conversation goes something like this;

“My cash drawer won’t open!”

“Does your receipt printer work?”

“No, that won’t work either!”

“Did you move your computer?”

“Yes…”

This is a serious problem with a simple solution. What has happened is that the USB cable from the computer to the printer was disconnected, usually because the computer had to be moved or repaired for some reason. When the printer is reconnected, Windows doesn’t know that it’s the same old printer, so it creates a new printer. QB POS is still pointing to the old printer, which Windows thinks is disconnected.

Here’s how to fix it:

1. Click the Windows “Start” button, then click “Printers and Faxes”. This process may vary depending on which version of Windows you’re using and whether you’ve changed your start menu settings. If you don’t see Printers on your start menu, try opening the Windows Control Panel and accessing the list of printers from there.
2. Find the copy of the printer that works. You will probably see multiple copies of your receipt printer (my record so far is 6). For example, if your receipt printer is called “Citizen CT-S300″ you will probably also see a printer called “Citizen CT-S300 (Copy 1)”. All but one of these copies will be offline. It’s usually the highest-numbered copy which is working correctly. Make a note of the name of the printer which is not offline.
3. Now log into QB POS as Sysadmin and go to workstation preferences (Edit -> Preferences -> Workstation). In the “Documents & Printers” section you’ll see a list of the various types of documents that can be printed, along with the printer and template which should be used for that type of document. In the “Printer” column, find the rows that point to your “old” receipt printer (e.g. “Citizen CT-S300″), and change the drop-down to point to the “new” printer name (e.g. “Citizen CT-S300 (Copy 1)”). Be sure to scroll all the way to the bottom of the list, and make sure the “X/Z Out” report is pointing to the correct printer. You should not need to change anything in the “Template” column, but check to make sure that any documents that go to a receipt printer are using a 40-column template.
4. Click the “Save” button at the bottom of the screen.

To test the new settings, bring up an old sales receipt and try to print it. You can also press Ctrl-F8 to make sure the cash drawer opens.

At this point your problem should be solved. However, you may want to do a bit of housekeeping. The “old” copy of the printer still exists in Windows, and probably has several documents (receipts) queued up to print.

1. Go back to “Printers and Faxes” on the Windows start menu.
2. Double-click on the “old” (offline) printer.
3. Under the “Printer” menu, select “Cancel All Documents”
4. Close this window to return to the list of all printers.
5. Right-click on the offline printer and select “Delete” from the menu.

There may be a delay between each of these steps, as it can take a few moments for Windows to cancel documents or to delete a printer.

If you need to re-print any receipts, open them in Sales History and reprint them.

Problem solved!

I’ve been promising for a while now that I would document some of the things that accounting professionals (usually bookkeepers) need to know about QuickBooks Point of Sale. This article is the first in a series that will do just that. Topics that I’ll cover will include:

1. Mapping transactions to the chart of accounts in QuickBooks
2. Sales tax
3. Banking
4. Purchasing and receiving inventory
5. Inventory adjustments
6. Accounts Receivable

I’ll leave that list open-ended for now, since I’m sure some other questions and ideas will come up as the series progresses.

[Note that I’ll refer to QuickBooks Point of Sale software as “POS” and QuickBooks financial software (Pro, Premier, or Enterprise) as “QBF”.]

I frequently talk to accounting pros who are experts with QBF but know little or nothing about POS. This is not surprising, because when POS is properly configured and integrated with QBF, there’s rarely a need for a bookkeeper to access POS. Still, it’s useful to understand what information is sent from POS to QBF, and how to deal with occasional problems and questions.

The focus of this series is on ongoing bookkeeping, not on how to set up POS, although some ongoing maintenance tasks will be covered, such as what to do when sales tax rates change. The articles will assume that your POS system has already been integrated with QBF. If you need help with this, please contact me or a local QuickBooks ProAdvisor.

If you’re a bookkeeper who is new to POS, please keep in mind that some of the processes I’ll describe may be different from what you’re used to when using QBF for a retailer who rings up sales manually or with an ECR (electronic cash register). There may be a number of different ways to accomplish a task in QBF (including good old-fashioned journal entries), but when you throw POS into the mix, you and your client can save a lot of time and money by letting POS do some of the work for you. For $800 to $1,700 per workstation (and that’s just for the POS software), your client is going to expect to save some money on bookkeeping. This should free up some of your time to take on new clients or expand your practice into new areas.

Working with the QuickBooks chart of accounts

OK, so let’s dive into the main topic of this article, which is how POS uses QBF’s chart of accounts.

I’d like to start out by pointing out the difference between management reporting and income tax or financial reporting. When it comes to managing a retail business, some of the most useful reports are available within POS. Top sellers, sales by vendor or department, and inventory levels are examples of information available in POS. Furthermore, POS works with QBF’s built-in sales tax reporting to track everything you need for state and local tax reporting. The reason I point this out is that you should not need to clutter up the chart of accounts in QBF in order to produce most of your management and sales tax reports. To the extent possible, try to keep your chart of accounts simple, and let POS do the heavy lifting when it comes to retail management reporting.

Account Preferences

In POS, click on Accounts under Company Preferences (Edit menu -> Preferences ->Company), as shown in Figure 1. Note that when you click on “Accounts” POS will take a few moments to connect to QBF.

Figure 1: Account Preferences in QuickBooks Point of Sale

Under the Basic tab, you’ll see 3 sets of accounts for each different type of item that the business can sell. (Group items are like gift baskets, consisting of other types of items, so they don’t have their own accounts.) Each type of item has an income account, a cost of goods account, and an asset account. These settings apply to any new items that are created in the future, and you can apply them to the entire item list by clicking the button at the bottom labeled “Apply accounts to existing items” (don’t click this unless you really mean it!). In the next section we’ll talk about how to change these settings for individual items.

You’ll notice that, by default, Non-Inventory and Service items have the same account in the cost of goods column and the asset column. The net effect of this is that the COGS and Inventory transactions cancel each other out, and only the income is sent to QBF. Expenses for these items are usually tracked directly within QBF at the time of purchase.

Some account names are displayed with angle brackets, such as “<Merchandise Sales>”. This means that the account does not exist in QuickBooks. The account will be created the next time POS sends activity for this account to QBF, or you may select another account.

At this point I’d like to remind you to try to keep your chart of accounts simple. In many cases you won’t need multiple income or cost of goods accounts, because the need for that information can often be addressed with built-in POS reports. However, if your investors, lenders, or owners need to see this information in the financial reports, feel free to change the settings as needed. Some businesses will also need to break out certain types of merchandise, like alcohol, for reporting to regulatory agencies, and may need to see this breakdown on the P&L rather than in POS reports. Also note that at the bottom of the Basic tab in Account preferences, you can automatically create sub-accounts based on stores and/or departments.

Finally, let’s take a look at the Advanced tab. Here you’ll see many other types of accounts that POS uses, such as Freight In, Shipping Income, Sales Tax liability, etc. A bookkeeper should become familiar with this list so you know where the dollars are ending up in QBF. There’s probably no need to change these accounts, unless you’re adding POS to an existing QBF company file and have other accounts that you’d like to keep using. Note also that if you’re tracking Freight and Shipping Costs (Freight In) under Cost of Goods Sold, you may need to change the account type from Expense to Cost of Goods in QBF. Otherwise it will show up under operating expenses rather than cost of goods on your P&L.

Account settings for items

When POS is integrated with QBF, you can modify the cost of goods, income, or inventory asset account associated with individual items. In POS, open the item list, double-click on an item, and click the Additional Info tab. You’ll see a section labeled “QuickBooks Information” as shown in Figure 2.

Figure 2: Account Settings for Items

This allows you to make changes to individual items that don’t use the default settings that you set up in Company Preferences. If you have a large number of items that you need to change, you may find it easier to do this on the item list as follows:

1. In the POS item list, right-click anywhere on the column headings, and select “Customize Columns” from the pop-up menu.
2. Configure the column display to include the account columns (COGS, Income, Asset) that you need to modify. Click “Save”.
3. If possible, sort the list in such a way that the items you want to edit are grouped together.
4. Turn on List Edit Mode (Edit menu -> Turn List Edit On).
5. Edit item accounts as needed on the item list. Keep in mind that if you’re changing a value in a sorted column, the sort order will change whenever you make a change.
6. When finished, turn off List Edit Mode (under the Edit menu).

Conclusion

I hope you find this information helpful. Please feel free to make comments or ask questions so that I can be sure to provide information that is useful to you. If you need more extensive help, email me at mike@mikebranchqb, or contact your local QuickBooks ProAdvisor.

In the next article, I’ll talk about how to manage sales tax between POS and QBF.