How Tax Sync Works for Shop App Orders?

Overview:
This article explains how tax syncing works for Shop app marketplace orders in QuickBooks. It covers how marketplace taxes are recorded using a liability account and how those taxes are adjusted once Shopify processes the payout, ensuring accurate tax reporting.

Detailed Information:

When the first Shop app marketplace order is synced to QuickBooks through our app, a liability account named “Shopify Marketplace Sales Tax” is created in QuickBooks. This account serves as a temporary holding account for marketplace tax amounts.

Tax Recording for Shop App Marketplace Orders

For each Shop app marketplace order that is synced:

• A line item labeled “Marketplace Sales Tax” is added to the order.

• This line records the tax amount and increases the tax liability in the “Shopify Marketplace Sales Tax” account in QuickBooks.

Later, when additional Shop app marketplace orders are synced, the tax for those orders continues to be recorded in the same liability account, “Shopify Marketplace Sales Tax.”

Payout Processing and Tax Adjustment

Once Shopify processes the payout for a Shop app marketplace order:

• A journal entry is created to reduce the corresponding tax liability account.

• This ensures that the tax balance is adjusted correctly for the specific order associated with the payout.

Note: This functionality works only when the payout flow is enabled in the app settings.

If Payout Flow Is Not Enabled

If the payout flow is not enabled in the app settings and you do not want marketplace taxes to sync to QuickBooks:

• A configuration can be applied to stop syncing tax for Shop app marketplace orders to QuickBooks.

This setup provides flexibility based on your accounting preferences and workflow.