Managing sales tax for Square transactions requires meticulous attention to multiple tax regions, manual reconciliation of complex payouts, and careful tracking across different tax rates.Ā
As transaction volumes grow, the risk of errors and compliance issues increases, potentially leading to costly penalties and audit headaches.
While Square provides basic sales tax reporting tools, manually processing this data into accurate financial records is time-intensive and error-prone.Ā
Link My Books automates the entire process by syncing your Square sales tax data directly with Xero or QuickBooks, transforming hours of manual work into a task completed in minutes.
Key Takeaways from this Post
You can easily generate sales tax reports through the Square Dashboard by navigating to Reports > Taxes, applying filters, and exporting data.
If youāre doing your bookkeeping manually, you might be adding stress to an already complicated situation. Manual reconciliation and tax settings configuration will take up a lot of time.Ā
Link My Books simplifies this process by automating sales tax reporting and ensuring accurate data synchronization with accounting software like QuickBooks and Xero. It transforms hours of manual work into a task completed in minutes.







How to Get a Sales Tax Report on Square
- Log In
- Navigate to Reports
- Filter the Data
- Customize Filters
- Export the Report
These are the steps and we will expand on them. But, manual sales tax reporting can be tricky and lead to:
- Misconfigured tax rates for products or regions
- Forgetting to remit taxes in certain jurisdictionsĀ
- Spending excessive time reconciling sales and tax figuresĀ
The solution? Automating your reporting with Link My Books. It ensures accurate reconciliation and reduces the time spent on bookkeeping from hours to minutes.
And you can try it out for free. š

Step #1: Log In
- Go to Square and sign in to your Dashboard
Step #2: Navigate to Reports
- After logging in to your Square Dashboard, locate the Reports tab on the left-hand menu
- Click Taxes to view all sales tax-related data
Step #3: Filter the Data
- Ensure your tax settings are properly configured in the Settings > Taxes section
- Add regional or product-specific tax rules to ensure accurate calculations
- Use the available filters to refine the report based on your needs
- Use the date selector tool to refine the report by time frame. For example, you can focus on a specific quarter or year, depending on your filing needs
Step #4: Customize Filters
- Apply additional filters such as regions or product categories for specific insights
- For instance, if you operate in multiple states, this step allows you to see tax data segmented by region
Step #5: Export the Report
- Select āExportā to download the report in a format compatible with your accounting software.
- Save the report in your preferred format (CSV or PDF) for further analysis. CSV files are particularly useful for importing data into accounting software or spreadsheets.
How to Remit Your Square Sales Tax

Remitting sales tax collected through Square involves several steps to ensure compliance with state and local tax authorities. Here's what to do:
1. Verify Report Data
- Review Sales Tax Settings: Ensure that your sales tax settings in Square are correctly configured to match the tax rates and rules of your jurisdiction. This includes setting up appropriate tax rates for different products or services and specifying whether taxes apply to shipping and delivery fees.
- Cross-Reference with Jurisdictional Requirements: Compare the data from your Square reports with the tax obligations outlined by your state or local tax authority. This ensures that the correct tax rates have been applied and that all taxable sales are accurately accounted for.
2. Submit to Authorities
- Understand Filing Frequencies and Deadlines: Determine the filing frequency (monthly, quarterly, or annually) mandated by your jurisdiction. Missing a deadline can result in penalties, so adhere to the specified schedule.
- Prepare Tax Returns: Utilize the verified data from your Square reports to complete the necessary tax return forms. Ensure that all required information, such as total sales, taxable sales, and the amount of tax collected, is accurately entered.
- Remit Payment: After completing the tax return, submit it along with the payment for the taxes owed to the appropriate tax authority. This process is typically conducted through the tax authority's online portal.
3. Automate Compliance
- Integrate with Accounting Software: Consider integrating Square with accounting platforms like QuickBooks or Xero through Link My Books to streamline the reconciliation process. This integration can help you automatically categorise sales and tax data, reducing manual entry errors.
- Utilize Sales Tax Automation Tools: Explore third-party applications available in the Square App Marketplace that specialize in sales tax management. For instance, tools like DAVO Sales Tax can automate the process of setting aside collected taxes daily and remitting them to the state when due.
- Stay Updated on Tax Law Changes: Tax laws can change, affecting rates and compliance requirements. Regularly review updates from your local tax authority or consult with a tax professional to ensure ongoing compliance.
How Link My Books Makes Accounting for Square Sales Tax Easy

Link My Books seamlessly connects your business with Xero and QuickBooks so you can count on your books always being in order. It automates the entire process, validating each transaction, ensuring accurate tax application, and simplifying reconciliation with one-click matching.Ā
How Does it Work?
- Connect your Square account to Xero or QuickBooks via Link My Books.

- With each Square payout, Link My Books verifies all transactions, ensuring that every order is treated correctly for tax purposes.

- Link My Books then creates a detailed summary invoice, itemizing the payout into sales, refunds, and fees, and assigning them to the proper accounts with the correct tax rates.

- Every entry matches effortlessly with the bank deposit in a single click.

The integration takes 15 minutes to set up and you can try it out for 14 days, free of charge.Ā
Features that Simplify Accounting for Square Sales Tax

1. Automated Payout Matching

One of the biggest challenges sellers face is aligning Square payouts with bank deposits. Square combines sales, refunds, and fees into a single deposit, which rarely matches individual transactions. Manually sorting through these can take hours and often leads to errors.
How Link My Books Helps:
- It automatically summarizes your transactions at the payout level.
- The summarized entry aligns perfectly with the deposit that appears in your bank feed.
- This eliminates the guesswork, ensuring you can reconcile in just one click.
2. Accurate Fee Tracking

Square deducts its processing fees before transferring payouts, which can make it tricky to identify and account for these costs correctly. Sellers who overlook or misclassify fees often end up with inaccurate profit and loss reports.
How Link My Books Helps:
- Square processing fees are automatically pulled, separated, and categorized as expenses in Xero and QuickBooks.
- The fees are clearly labeled, making it easy to see how much youāre paying Square for each transaction.
3. Seamless Tax Management

Handling taxes on Square transactions, whether itās sales tax, VAT, or GST, can get complicated, particularly when selling across multiple regions. Manually applying the correct tax rates increases the risk of errors, which can lead to compliance issues.
How Link My Books Helps:
- It automatically identifies and applies the correct tax rates for every transaction based on the data from Square.
- Taxes are categorized properly, ensuring compliance with local and international regulations.
4. Cost of Goods Tracking

Tracking the cost of goods sold (COGS) is essential for understanding product profitability. By tracking COGS alongside revenue, you can make informed decisions about pricing, inventory management, and overall business strategy.
How Link My Books Helps:
- Link My Books will take account of each of the products sold as part of your Square payouts.Ā
- Then move their monetary value (landed cost) from your chosen inventory account to your chosen cost of goods sold account on the profit and loss statement.
5. Time Savings

Manual reconciliation is not only error-prone but incredibly time-consuming. Breaking down Square payouts, tracking fees, and matching bank deposits can take hours, time that could be better spent growing your business.
How Link My Books Helps:
- Automates the entire reconciliation process, saving you hours every month.
- Consolidates thousands of individual transactions into clean, summarized entries that are easy to review and reconcile.
6. Scalable for High Transaction Volumes

If youāre processing a handful of transactions each month, manual reconciliation might still be manageable. But as your business grows and Square transactions increase, the process becomes unsustainable.
How Link My Books Helps:
- It scales effortlessly with your business, whether youāre processing 10 or 10,000 payments per month.
- Large transaction volumes are summarized into clear, digestible payout entries without losing accuracy.
7. Multi-Channel Support

If youāre active on multiple platforms, like Shopify, or eBay, or you have your own website. Link My Books consolidates financial data from all these channels, providing a unified view of your finances. This is crucial if you need to manage inventory, track profitability, and generate financial reports across different platforms.
Try Link My Books for free today! š
If youāre still on the fence about which accounting software to use, read more about the best accounting software for Square.
Essential Square sales tax report figures to know
Your Square sales tax report includes vital data points here are the numbers you need to pay attention to:
Total Sales
This is the gross revenue generated during the reporting period, representing the full value of transactions processed through Square before any deductions like refunds, discounts, or fees. It offers a raw overview of how much money your business brought in, making it a key metric for understanding your top-line revenue.
- Example: If you sell 150 items at $25 each, your total sales will be $3,750. Even if you later issue refunds for 5 items ($125), the total sales figure will remain $3,750, as it doesnāt account for adjustments like refunds or chargebacks.
Taxable Sales
This is the portion of your total sales subject to taxation based on the tax rules of your jurisdiction. It excludes non-taxable items, which could include certain food products, services, or other exempt categories, and may also factor in whether shipping charges are taxable in your area.
- Example: You operate in a state where groceries are tax-exempt, but other goods are taxable. If you sell $1,000 in groceries and $2,000 in taxable items, your taxable sales would be $2,000. If your jurisdiction also taxes shipping, and you charged $200 for shipping, your taxable sales would increase to $2,200.
Collected Taxes
This is the actual amount of sales tax collected from your customers during the reporting period. Itās calculated by applying the appropriate tax rates to the taxable sales amount. This figure represents your liability to tax authorities, as these funds are collected on their behalf and must be remitted.
- Example: If your taxable sales total $2,200 and your stateās tax rate is 6%, the collected taxes would be $2,200 Ć 0.06 = $132. This amount is what you owe to your state or local tax authority.
Why These Metrics Matter
- Total Sales gives a snapshot of your revenue and helps evaluate overall business performance.
- Taxable Sales ensures compliance by isolating the sales subject to tax, which is essential for accurate reporting.
- Collected Taxes highlights your tax liability, helping you stay on top of remittance obligations and avoid penalties.
How to use Square Sales Tax Report Figures for VAT Calculation

For businesses operating in regions where VAT (Value Added Tax) applies, accurately calculating and reporting VAT is critical to ensure compliance with tax authorities. Square sales tax reports can simplify this process by providing the necessary data.
Why Are Figures Shown in USD?
Many sellers, especially those based in the U.S., configure their accounts to display transactions in USD as their default currency. Even when operating in VAT regions, using USD simplifies bookkeeping and reporting. The sales tax or VAT calculations initially occur in USD, and the conversion to the local currency typically happens during remittance to the tax authorities. This allows sellers to maintain consistency across their financial reports, particularly when selling in multiple international markets.
Ā Here's a detailed explanation of how to calculate VAT using these figures:
Step 1: Identify Taxable Sales
VAT is calculated on taxable sales, which refers to the sales subject to VAT under your local regulations. Squareās tax report includes a breakdown of total sales and taxable sales, making it easier to determine which portion of your revenue is subject to VAT.
- Practical Example: Suppose your business has total sales of $10,000, but $2,000 consists of VAT-exempt items (e.g., certain groceries or exports). Your taxable sales for VAT purposes would be $8,000.
- Tip: Verify that your tax settings in Square are configured correctly to distinguish between taxable and non-taxable items. This ensures the accuracy of the taxable sales data in your reports.
Step 2: Calculate VAT Owed Based on Local Rates
Once you have identified your taxable sales, apply the applicable VAT rate to determine how much VAT is owed. VAT rates vary by country and product type, so itās essential to confirm the correct rate for your specific situation.
- Practical Example:some text
- Taxable Sales: $8,000
- Local VAT Rate: 20%
- VAT Owed: $8,000 Ć 0.20 = $1,600
- Special Cases: Some regions have reduced VAT rates for certain goods or services (e.g., 5% for childrenās products). If your taxable sales include items at different VAT rates, youāll need to calculate VAT for each category separately.
Additional Considerations
- VAT Input vs. Output: If you are VAT-registered, you can claim back VAT paid on business expenses (input VAT) while reporting VAT collected from sales (output VAT). Ensure you track both accurately in your accounting system.
- Thresholds: Some countries have thresholds below which businesses are not required to register for VAT. Check if your total taxable sales exceed the registration threshold in your region.
Use Link My Books to Automate VAT Calculations and Submissions

Managing VAT (Value-Added Tax) can be complex, especially for e-commerce businesses dealing with products subject to different tax rates. Link My Books addresses this challenge with its VAT Product Grouping feature, which automates the allocation of tax rates to standard, reduced, and zero-rated goods.

- Data Sync: Link My Books imports your sales data directly from Square, ensuring all taxable and non-taxable sales are accurately accounted for.
- VAT Categorization: It applies the correct VAT rates based on your configuration, whether standard, reduced, or zero rates.
- Submission: Once the VAT is calculated, Link My Books generates VAT return reports and syncs the data with your accounting software.Ā
Practical Benefits
- Accuracy: Eliminates manual errors by automating the VAT calculation process.
- Time Savings: Reduces the hours spent reconciling data and preparing VAT returns.
- Compliance: Ensures your VAT filings align with the latest regulations, minimizing the risk of penalties.
š Try Link My Books for Free š
Why You Need a Square Sales Tax Report

Link My Books integrates with Square through Xero and QuickBooks to automate the synchronization of sales data, including taxable sales and collected taxes, into your accounting software. So if youāre using this automation there is no need for manual generation of Square Sales Tax Reports for daily operations.
However, if youāre doing things manually Square's Sales Tax Reports can be beneficial for:
Compliance
Accurate reports ensure you meet state and regional tax obligations. Without these reports, you risk underpayment, which can lead to penalties, or overpayment, which unnecessarily reduces your cash flow.
Financial Insights
Understand your tax liabilities and profitability to make informed decisions. Clear insights help identify trends, assess tax burdens, and refine pricing strategies to maintain profitability.
AuditĀ
Having detailed sales tax reports ensures that your business is prepared for audits. These reports provide a transparent record of your tax collection and remittance activities, reducing stress and saving time in the event of an audit.
Simplified Multi-State Operations
For businesses operating in multiple states or regions, sales tax reports help manage varying tax rates and compliance requirements efficiently. They consolidate all regional tax data into one place, making it easier to track and remit taxes accurately.
FAQ on Square seller sales tax reporting

Does Square Collect Sales Tax for Sellers?
Yes, Square can calculate and collect sales tax on your behalf. When you configure tax settings in your Square Dashboard, the platform automatically applies the appropriate sales tax rates to customer transactions at checkout. However, Square only collects the tax, it does not remit the funds to tax authorities. It is the sellerās responsibility to remit the collected taxes.
Will Square Send Me a 1099?
Square provides Form 1099-K to sellers who meet specific transaction thresholds:
- $600 or more in gross sales annually for most sellers in the U.S. (current federal threshold as of 2023).
- The form details the total gross sales processed through Square but does not account for refunds, discounts, or fees. Make sure to reconcile this information with your records when filing taxes.
How Can I Find Sales by Country on Square?
To view sales data segmented by country:
- Log in to your Square Dashboard.
- Navigate to Reports > Sales Summary.
- Use the filters to refine your data by country or region. This is particularly helpful for international sellers who need to separate sales and tax data for compliance with VAT or other regional tax laws.
Does Square Net Sales Include Sales Tax?
No, Squareās net sales figure does not include sales tax. Net sales represent the total revenue after deductions such as discounts and refunds but exclude taxes collected on behalf of tax authorities. This makes net sales a more accurate reflection of your businessās operational revenue.
How Much Do I Have to Make on Square to File Taxes?
Tax filing thresholds vary based on jurisdiction:
- In the U.S., you must file taxes if your taxable sales exceed your stateās minimum filing threshold. Most states require businesses to remit sales tax even if you make just one taxable sale.
- For income tax purposes, consult your stateās or countryās regulations to determine the reporting requirements.
Does Square Automatically Take Out Sales Tax?
Square does not automatically remit sales tax to tax authorities. While it calculates and collects sales tax during transactions based on your tax settings, it is your responsibility to:
- File the necessary tax returns.
- Remit the collected sales tax to the appropriate state or local tax authority.
Simplify Accounting for Square Sales Taxes with Link My Books

Link My Books seamlessly integrates with leading accounting software like Xero and QuickBooks Online, ensuring every transaction is recorded accurately, taxes are applied correctly, and bank reconciliations are a breeze.
By automating tedious financial tasks and delivering actionable insights, Link My Books empowers you to focus on what truly matters - scaling your business.
Ready to streamline your Square accounting? Start your free trial with Link My Books today and experience the difference it can make in your bookkeeping process.
