Setting Up and Troubleshooting: Sales Tax

If you are trying to create an invoice but sales tax is not being added to any invoice in QuickBooks, here are the steps you'll want to take to correct the issue:

QBO will always be the one to actually apply the Sales Tax. As of July 31st, 2025, sales tax will be determined by the QuickBooks Item each Scope of Work and Rate Mod is set to.

QuickBooks Item field pulls your products and services from your QuickBooks account and helps you categorize line items from your invoices in QBO. Rate mods do not need to be set to a specific QuickBooks Item unless they need to be tracked under a different product/service or are under a different tax rate than the scope of work. By default, they will follow the tax setting for the product/service selected under the scope of work.

Go to Company > Other > Quoting and Scopes > Scopes of Work or Rate Mod tabs. Once inside the rate mod or scope of work, verify that the QuickBooks Item is the correct product/service from your QuickBooks account (see below).

Make sure to also do this for inactive scopes as well, just in case they are still being used for current customers. By default, only active scopes of work will appear. To show inactive scopes as well, go to the Scopes of Work tab, click on the arrows on the top right of the page, and select Show Inactive. Then you can go into the scope of work and set a QuickBooks Item.

In your QuickBooks account, you will also want to verify that these products/services have the appropriate tax setting. Go to Sales > Product and Services > Edit > Sales Tax Category and make sure the item is either set to taxed or not taxed.

Just Getting Started Setting Up Sales Tax?

Check out the video below for an overview of the Sales Tax setup!

In QuickBooks, Navigate to Taxes > Sales Tax > Sales tax settings .

" Default sales tax " needs to be set, and both "Mark all new customers taxable" and "Mark all new products and services taxable" needs to be checked.