Changing a sales tax rate in QuickBooks takes just a few clicks, but the exact steps depend on whether you use QuickBooks Online or QuickBooks Desktop, and whether your tax rates are managed automatically or manually. In some cases, you’ll edit the rate directly. In others, the better approach is to deactivate the old rate and create a new one so your historical records stay accurate.
How Sales Tax Works in QuickBooks Online
QuickBooks Online handles sales tax in two ways. If you turned on the automated sales tax feature, QuickBooks calculates rates for you based on your customer’s location, your business address, and what you’re selling. You generally can’t edit these rates directly because they’re pulled from tax databases. If you set up tax rates manually or created custom rates, you have full control to change the percentage whenever you need to.
The method you need depends on which setup you’re using. If you’re not sure, go to All Apps, then Sales Tax, then Overview. If you see rates listed under “Related Tasks” with an “Add/edit tax rates and agencies” link, you’re using manual rates. If you see a “Sales Tax Settings” area with a “Custom rate” section, you’re working with custom rates within the automated system.
Editing Manual Tax Rates in QuickBooks Online
For manually created tax rates, follow these steps:
- Go to All Apps, then Sales Tax, then Overview.
- Under Related Tasks, select “Add/edit tax rates and agencies.”
- Find the rate you want to update in the Sales Tax Rates and Agencies table and select Edit.
- Enter the new tax rate percentage. You can also rename the rate if needed.
- Select Save.
One important detail: changing the rate this way applies to all future transactions, including any future transactions dated before the change. It does not retroactively alter past transactions that have already been recorded. Your reports will show data for both the old and new rates, so your historical records remain intact.
Editing Custom Tax Rates in QuickBooks Online
If you created a custom rate within the automated sales tax system, the path is slightly different:
- Go to All Apps, then Sales Tax, then Overview.
- Select Sales Tax Settings.
- Find the rate you want to change in the Custom Rate section and select Edit.
- Update the name or rate percentage.
- Select Continue, then select Edit to confirm.
When You Can’t Edit the Rate Directly
In some versions of QuickBooks Online, the tax rate field is locked and can’t be modified. If that’s your situation, the workaround is to deactivate the existing rate and create a fresh one with the correct percentage.
To deactivate the old rate:
- Go to All Apps, then Sales Tax, then Sales Tax Settings.
- Choose the tax rate name and select Edit.
- Select “Make Inactive.”
To create the replacement rate:
- Go to All Apps, then Sales Tax, then Overview.
- Select Sales Tax Settings, then New, and choose a single tax rate.
- Enter the tax name, the agency you pay the tax to, and the new percentage rate.
- Select Save.
This approach keeps your old transactions tied to the original rate while all new transactions use the updated one. It’s also the cleanest method if you need a clear audit trail showing exactly when the rate changed.
Overriding Tax on a Single Transaction
Sometimes you don’t need to change the rate across the board. You just need to fix the tax amount on one invoice or sales receipt, often because of a rounding difference or a customer-specific exemption. QuickBooks Online lets you do this directly on the transaction.
Open the invoice, sales receipt, or payment in question. Look for the sales tax total at the bottom and select “Override this amount.” Enter the correct rate or dollar amount, choose a reason for the change from the dropdown, and select Confirm. This adjustment only affects that single transaction.
Changing Sales Tax Rates in QuickBooks Desktop
QuickBooks Desktop stores tax rates as items in your Item List, which gives you two options: edit the existing item or create a new one.
To edit an existing sales tax item:
- Go to Lists in the top menu bar, then select Item List.
- Find the sales tax item you need to update, right-click it, and choose Edit Item.
- Change the tax rate to the new percentage.
- Select OK to save.
Keep in mind that editing the item this way can affect how QuickBooks displays the rate on older transactions if you pull them up. If preserving your historical data matters (and it usually does, especially around tax filing periods), creating a new item is the safer route.
To create a new sales tax item instead:
- Go to Lists, then Item List.
- Right-click anywhere in the list area and choose New.
- Select Sales Tax Item as the type and fill in the details: name, rate, and the tax agency you remit to.
- Select OK to save.
- When QuickBooks asks if you want to update all past and future transactions, select No. This ensures only new invoices use the updated rate.
After creating the new item, start assigning it to your invoices and sales receipts going forward. You can make the old item inactive to prevent accidentally using it: right-click the old item in your Item List and choose “Make Item Inactive.”
Which Method to Use
If you’re mid-quarter and the rate change takes effect on a specific date, creating a new rate (rather than editing the existing one) is almost always the better choice. It gives you a clean split between transactions taxed at the old rate and transactions taxed at the new rate, which makes filing your sales tax return much simpler.
If the rate change is correcting a mistake you made during setup and no transactions have been recorded yet, editing the existing rate is fine since there’s no history to protect.
Regardless of method, run a sales tax liability report after making the change to verify that your upcoming transactions reflect the new rate and your past filings still look correct. In QuickBooks Online, you’ll find this under Reports by searching for “Sales Tax Liability.” In QuickBooks Desktop, go to Reports, then Vendors & Payables, then Sales Tax Liability.