How Can I Credit a Customer for Just the Amount of Sales Tax?

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It happens from time to time: you invoice a customer and charge them sales tax, but then later realize that the customer - or the services rendered - are exempt.  So what do you do now?  

If no payment has been tendered to the invoice, it is possible to open the original invoice and set the Tax Code to Exempt.  

Then reprint or email the corrected invoice for the customer.  But it may not always be this easy.  Perhaps the invoice was already posted to your accounting system and cannot be removed.  Or maybe a payment has already been applied to the invoice.  At this point, you'll need to generate a credit memo instead.  

Here's how you can accomplish this:

1. Open the original invoice from the Invoice List or from the Customer Center.

2. In the Sales Invoicing screen, go to Activities → Create Credit Memo.

3. The Credit Memo screen will automatically fill with all of the line items from the invoice.  For the next available line item, add a billing code for the sub total amount of the invoice (leave off the tax) and enter as a negative with the '-' key, on your keyboard.  ESC's default billing code DESC is perfect for this (tho, your company may use something different as your default). This should bring the total of the credit memo to $0.

4. Uncheck the Tax box for the negative amount.  Now the total of the credit memo should be equal to only the amount of tax that was charged on the original invoice.

5. Click Save.

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Comments

1 comment
  • #3 was a little confusing when it suggested the DESC billing code.
    We use a DISCSALES billing code we created.
    The process did not show a zero balance
    But did reflect just the sales tax once following the complete process.
    Thank you

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