Tax Setup and Compliance Flashcards

How does QBO's automated sales tax handle a client that sells to customers in multiple states?

Answer: It applies the correct rate based on each customer's ship-to state using its built-in tax table

QBO's automated sales tax uses the customer's ship-to address to look up and apply the correct rate from its integrated tax table.

What is 'nexus' in the context of sales tax compliance for a QBO client in the US?

Answer: A sufficient connection to a state that creates an obligation to collect and remit sales tax there

Nexus is the legal connection to a state — through physical presence or economic activity — that triggers a sales tax collection obligation.

In QBO, where do you record that a customer has provided a sales tax exemption certificate?

Answer: In the customer's profile under Tax info

You enter the customer's exemption in their Tax info field within their customer profile, which then suppresses sales tax on all their transactions.

Which QBO report is best for reconciling sales tax collected against the amounts shown on a tax return?

Answer: Sales Tax Liability Report

The Sales Tax Liability Report breaks down tax collected by agency and period, making it the standard reconciliation tool for return preparation.

When a ProAdvisor sets up sales tax in QBO for a new client, what is the recommended first configuration step?

Answer: Enter the correct business address and configure tax agencies based on where the client has nexus

Entering the correct business address and nexus-based tax agencies ensures QBO calculates accurate sales tax rates from the first transaction.

What is the impact of changing a product from 'non-taxable' to 'taxable' in QBO?

Answer: It applies sales tax to that product on all future transactions only

Changing a product's taxability only affects future transactions; QBO does not modify historical invoices.