If you look at the Taxable Sales Detail report in QuickBooks, and turn on the display of the "Tax Amount" column (click on the gear icon to select the columns displayed), you will notice that the numbers in the “Tax Amount” column for invoices from ContractorTools do not match the sales tax amounts for line items in ContractorTools. Sometimes they are not even close, and this is understandably confusing. Here’s the reason:

Both ContractorTools and QuickBooks are able to calculate sales taxes, but, due to rounding discrepancies, it is possible that sales tax amounts calculated in ContractorTools might not exactly match the sales tax amounts calculated in QuickBooks. Because of that, QuickBooks provides third party software like ContractorTools the opportunity to write the sales tax amounts to QuickBooks, to override the tax amounts that QuickBooks would calculate. This is what ContractorTools is doing.

When QuickBooks calculates the sales taxes for an invoice, it calculates and records it separately for each invoice line item (not for the whole invoice). But when ContractorTools writes an invoice to QuickBooks, QuickBooks does not allow it to write the tax amount for each invoice line item; ContractorTools is only able to override the tax amount for the whole invoice. As a result, in order to store the tax amount, QuickBooks must divide and allocate the overriding invoice total tax amount from ContractorTools among the taxable line items. The way it does this is based on the ratio of the amount of each invoice line to the invoice total. 

For example, say an invoice for $100 has 3 lines; for $20, $30, and $50, and the sales tax amount is $10. The sales tax amount for each line would be $2, $3, and $5 respectively, and these are the amounts that would appear in the “Tax Amount” column in the Taxable Sales Detail report in QuickBooks. 

This seems pretty straight forward, and it is as long as all line items have the same tax rate. This starts to make less sense when the line items don't have the same tax rate, and this will be the case when your sales taxes in ContractorTools have different rates for each cost type (materials, labor, etc.)

For example, if you are set up to only calculate sales taxes for labor in ContractorTools and not materials, it will be confusing to see that QuickBooks assigns sales tax amounts to the material line items in QuickBooks. Again, this is happening because QuickBooks divides and allocates the sale tax amounts among all invoice line items, regardless of the tax rates for those line items in ContractorTools. 

The bottom line is, the total tax amounts displayed in the Taxable Sales Detail report in QuickBooks will match ContractorTools, but the tax amounts on individual line items may not, and this is to be expected. 

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