How do I record an expense with tax included in the payment?

Hello accounting147,

I'm excited to have you join us in the QuickBooks Online community! It's a great place to find answers to your product and how-to questions. I can help you with recording an expense that includes tax.

QuickBooks Online keeps things simple when it comes to the expense and sales tax features. First, I want to make sure you have sales tax configured in your account. Here's how it's done.

1. Select Taxes in the left menu.
2. Click Set up sales tax.
3. Choose a Province or territory from the drop-down to get started (Note: You can set up more provinces and territories later).
4. Click Save.
5. Set up the Tax Agency settings.
6. Click Next.
7. Click Got it to finish.

Follow the steps outlined in the following article to set up other taxes if needed: How to set up a new sales tax code

Now that that's turned on, let's go create the expense with tax included.

1. Click the Plus (+) icon.
2. Select Expense.
3. Fill in the Payee, Payment account, and other details.
4. To indicate the tax is already calculated in the total of the amount being entered, choose Inclusive of Tax in the Amounts are drop-down.
5. Enter the total with tax in the Amount column.
6. Or, to indicate the amount being entered is before tax, choose Exclusive of Tax from the drop-down.
7. Enter the total before tax in the Amount column.
8. In both instances, choose the appropriate code from the Sales Tax column drop-down.
9. Click Save and close when complete.

Here are a couple of screenshots so you can see the difference between the inclusive and exclusive of tax options.

Inclusive of Tax — Note the amount in the Amount column, Subtotal, and Total are each the same

Exclusive of Tax — Note the amounts of the Amount and Subtotal have the same, before-tax figure, then the Total displays the total with tax

I hope that helps! Have a great day.