How Does FlexBooks Handle Sales Tax?

If a sales tax account has appeared in your QuickBooks Chart of Accounts that you didn't create, and it has the same name as the sales tax you charge in Mindbody, this article is for you. It also covers how to make your Mindbody sales tax land in a sales tax account you already have.

What you will see

On the day of your first sync, FlexBooks adds a sales tax rate to QuickBooks with the same name as your sales tax in Mindbody. QuickBooks then creates a liability account for that rate on its own and files it under your Sales Tax Payable account. If you charge one tax called "Sales Tax", you will see a new rate called Sales Tax under Taxes, and a new sub-account under Sales Tax Payable to hold it.

That account fills up only when Mindbody actually charges tax on a sale. If none of your pricing options or products have tax switched on in Mindbody, the account stays at zero and nothing in your books changes.

How it works

Mindbody lets you set up to five sales taxes, each with a name and a rate, and then choose which products and pricing options each one applies to.

FlexBooks reads the taxes you have set up there. For each one, it looks in QuickBooks for a sales tax rate with exactly the same name. If it finds one, it uses it. If it doesn't, it creates one, at the rate you charge in Mindbody, and QuickBooks creates the account that goes with it.

Then on every sale, FlexBooks applies tax line by line, at the rate Mindbody charged on that line. A line Mindbody didn't tax goes into QuickBooks untaxed. A line it did tax carries that tax into the matching QuickBooks rate, and from there into its account.

Two things follow from that.

FlexBooks never chooses or names the account. QuickBooks does that when the rate is created, which is why the account name isn't always what you'd have picked.

And the name is the whole connection. FlexBooks matches your Mindbody tax to a QuickBooks rate by name and nothing else, so the same rate spelled two different ways in the two systems becomes two rates and two accounts.

Landing your tax in an account you already have

If you already track sales tax in QuickBooks and want Mindbody sales to feed the same place, name the sales tax in Mindbody exactly as the rate is named in QuickBooks under Taxes, including capitalization. On the next sync FlexBooks finds the rate by that name, uses it, and creates nothing new.

The name to match is the sales tax rate, not the account. Naming your Mindbody tax after the account, "Sales Tax Payable" for example, makes FlexBooks look for a rate by that name, find none, and create another one.

Do this before the first taxed sale syncs. If tax has already synced under a different name, the old rate and account keep what they have received, and a rename only changes where tax goes from the next sync onward. Moving what is already there is a journal entry, which your bookkeeper can do in a few minutes.

If QuickBooks calculates sales tax for you

FlexBooks needs sales tax to be switched on in QuickBooks, and for most United States companies that means QuickBooks' own automatic sales tax, which works out the rate from your business address and keeps its own accounts, usually named after your state's tax agency, plus one called Out Of Scope Agency Payable. Those are QuickBooks' accounts, separate from the one described above, and QuickBooks manages them itself.

If the new account is not one you want

If nothing has ever posted to it, make both the rate and the account inactive in QuickBooks. Do that only once your Mindbody tax is named to match a rate you are keeping, or the next taxed sale will create them again.

If the account already holds tax, leave it active and talk to your bookkeeper about where the balance should go. Deleting a tax rate that has been used changes past sales receipts.

Outside the United States

QuickBooks in Canada, Australia, the United Kingdom and elsewhere requires a tax code on every line of every sale. For those companies FlexBooks also creates a zero-rate code called Exempt and applies it to lines Mindbody didn't tax, so untaxed sales still go through.

If you are not sure

If you can't tell which account is which, or tax is landing somewhere you don't expect, send us a note before you change anything and we'll look at your setup with you. Moving a sales tax account is quick to do and slow to undo.