QuickBooks Online Sales Tax vs. TaxJar: Which Is Right for Your Business?
Sales tax compliance is one of the trickiest parts of running a business. Between tracking rates across multiple states, keeping up with economic nexus laws, and filing returns on time, many business owners quickly realize they need help. Two popular solutions are QuickBooks Online Sales Tax and TaxJar—but they approach the problem very differently. Let’s break down how each works and which might be the better fit for your business.
QuickBooks Online Sales Tax: Built-In Simplicity
QuickBooks Online (QBO) comes with an automated sales tax engine powered by Intuit’s database. Here’s what it offers:
✅ Pros:
Automatic Rate Calculation: QBO pulls in real-time sales tax rates based on your customer’s location, so you don’t need to manually maintain rate tables.
Nexus Tracking: You can mark which states you collect tax in, and QBO applies the rules accordingly.
Seamless Integration: Since it’s part of QuickBooks Online, there’s no extra software or subscription required. Your invoices, receipts, and reports all tie together.
Basic Reporting: QBO provides sales tax liability reports that help when it’s time to file.
❌ Cons:
Filing Is Still Manual: QuickBooks Online does not file your returns or remit tax payments automatically. You’ll need to log into each state’s portal (or hire someone to do it).
Limited Complex Nexus Support: If your business sells across multiple states or channels, QBO’s tracking can become cumbersome.
E-commerce Limitations: QBO doesn’t directly connect to Amazon, Shopify, or other marketplaces to pull in transactions with marketplace facilitator tax rules.
Best For: Small to mid-sized businesses with sales in just one or a few states, and those already using QuickBooks Online who want a simple, low-cost solution.
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TaxJar: Dedicated Sales Tax Compliance
TaxJar is a specialized platform built entirely around sales tax. Acquired by Stripe, it focuses on automating the entire sales tax lifecycle.
✅ Pros:
Multi-State Nexus Management: TaxJar automatically monitors your sales across states and alerts you when you cross economic nexus thresholds.
Automated Filing: With TaxJar AutoFile, the software can submit returns and remit payments on your behalf.
E-commerce Integrations: TaxJar connects with Shopify, Amazon, WooCommerce, BigCommerce, and more—pulling in sales automatically.
Detailed Reporting: Provides clear breakdowns of taxable, non-taxable, and exempt sales by state and jurisdiction.
❌ Cons:
Extra Cost: TaxJar is a separate subscription, so you’re paying in addition to QuickBooks Online. Pricing varies by transaction volume.
Learning Curve: More powerful features can mean more setup and ongoing management.
Separate System: While TaxJar integrates with QuickBooks Online, it’s still another platform to log into and maintain.
Best For: E-commerce businesses, companies selling across multiple states, or those that want fully automated filing and peace of mind.
QuickBooks Online Sales Tax vs. TaxJar: Side-by-Side
Choosing the Right Tool
If you’re a local service business or only collect sales tax in one or two states, QuickBooks Online’s built-in sales tax feature may be all you need. It keeps things simple and doesn’t add extra cost.
If you’re an e-commerce seller or a business with multi-state obligations, TaxJar’s automation can save you countless hours and reduce the risk of missed filings or penalties.
Final Thoughts
Both QuickBooks Online Sales Tax and TaxJar can help you stay compliant, but they’re designed for different types of businesses. The best choice comes down to where you sell, how complex your sales tax obligations are, and how much automation you want.
For many businesses, the sweet spot is actually using both together: QuickBooks Online for your accounting and bookkeeping, and TaxJar for automated sales tax compliance.
CANCELLED: QuickBooks Online to Discontinue Tags: What You Need to Know Before May 16, 2025
As of March 8, 2025, QuickBooks Online (QBO) will discontinue support for the 'Tags' feature across all subscription levels. This change aims to streamline data tracking and reporting within the platform. To ensure a smooth transition, it's essential to understand the implications of this update and the steps you can take to adapt.
Understanding the Discontinuation of Tags
'Tags' in QBO have allowed users to categorize transactions for more detailed insights. However, starting March 8, 2025, users will no longer be able to create or manage tags. From March 8 to April 30, 2025, existing tags will be accessible in a read-only format, permitting users to view and generate reports for tagged transactions. After April 30, 2025, all tag-related functionalities will be permanently removed from QBO.
Transitioning to Custom Fields
To compensate for the removal of tags, QBO is enhancing its 'Custom Fields' feature, providing users with a versatile alternative for data categorization. Custom fields enable the capture of specific information tailored to your business needs and can be utilized in both sales and expense forms. The number of available custom fields varies by subscription plan:
Simple Start: 1 custom field
Essentials: 4 custom fields
Plus: 4 custom fields
Advanced: 12 custom fields
This adjustment allows for more personalized data tracking, aligning with the unique requirements of your business.
Recommended Actions for Users
March 17, 2025 - Custom fields expanded functionality launches.
March 17, 2025 - May 15, 2025 - Migrate your tags to custom field(s).
May 16, 2025 - Tags become read-only. You cannot create new tags.
May 16, 2025 - May 15, 2028 - You can view tags and generate reports for historical transactions. After May 15, 2028, the ability to view tags and generate reports will no longer be available. Tags will be removed from QuickBooks Online and they will disappear from historical transactions.
Migrate tags to custom fields
Go to Settings ⛭ and select Tags.
On the tags page, select Migrate tags to custom fields.
Up to 100 tags will be auto-imported and all transaction forms will be pre-selected. Review the selections and make any necessary changes.
For any additional tags, you will need to manually add them to a custom field.
Select Save. Your tags are successfully migrated to custom fields and will be visible on all transaction forms.
Conclusion
The discontinuation of the 'Tags' feature in QuickBooks Online marks a significant shift toward enhanced customization through custom fields. I have always advised my clients to never use tags because of the printing and reporting limitations and instead take advantage of the robust custom fields available in QuickBooks Online Advanced. However, I can understand the basic use (not financially) of tags for tracking certain aspects of a business.
By proactively migrating your tags data to custom fields and familiarizing yourself with the new functionalities, you can maintain efficient and tailored financial tracking within QBO. Embracing these changes will ensure that your business continues to operate smoothly, leveraging the improved tools available for data management and reporting.
Why Hiring a Bookkeeper (Like Me, a ProAdvisor!) is Crucial for Small Businesses
Running a small business is no small feat. Between managing clients, handling operations, and growing your brand, bookkeeping might seem like just another task on your already packed to-do list. Many small business owners attempt to manage their own books, but doing so can lead to costly mistakes, missed tax deductions, and lost time that could be better spent growing the business.
As a QuickBooks ProAdvisor and professional bookkeeper, I understand the complexities of small business finances and am here to help you stay organized, compliant, and stress-free. Here’s why hiring a bookkeeper like me is one of the best investments you can make for your business.
1. Save Time and Focus on Growth
Every hour you spend reconciling accounts or categorizing expenses is an hour you’re not spending on growing your business. Bookkeeping is time-consuming, especially if you're not familiar with best practices and financial software. By hiring a professional, you free yourself to focus on the areas where you excel—whether that's serving clients, marketing your products, or developing new ideas.
2. Reduce Costly Errors
Incorrect data entry, missing transactions, and unbalanced books can lead to financial headaches, penalties, and inaccurate tax filings. A bookkeeper ensures your records are accurate, reducing the risk of costly errors and giving you peace of mind that your finances are in order.
3. Maximize Tax Deductions and Stay Compliant
Tax season can be stressful, but a well-maintained set of books can make all the difference. As a bookkeeper, I keep track of deductible expenses and ensure your records are IRS-compliant. This means you won’t miss valuable deductions or risk penalties due to inaccurate reporting.
4. Gain Financial Insights for Smarter Decision-Making
Understanding your financial position is crucial for making informed business decisions. A bookkeeper provides you with clear financial reports, cash flow analysis, and budgeting assistance, giving you the knowledge you need to scale and manage your business efficiently.
5. Seamless QuickBooks Integration and Optimization
As a QuickBooks ProAdvisor, I not only keep your books organized but also optimize QuickBooks for your specific needs. I can help set up automated workflows, customize reports, and ensure you’re using the software to its full potential—saving you both time and frustration.
6. Avoid the End-of-Year Rush
Scrambling to get your books in order right before tax season is overwhelming. A bookkeeper keeps everything up to date throughout the year, making tax filing smooth and stress-free.
7. It’s More Affordable Than You Think
Many small business owners assume hiring a bookkeeper is a luxury they can’t afford. In reality, the cost of bookkeeping services is often outweighed by the money saved in tax deductions, financial clarity, and time that can be reinvested into the business.
Let’s Get Started!
If you’re ready to take bookkeeping off your plate and gain financial clarity, I’d love to help! As a QuickBooks ProAdvisor, I offer expert bookkeeping services tailored to your business’s unique needs. Contact me today, and let’s work together to keep your business’s finances on track!