How to handle Freight and Sales Tax on Purchase Orders


In addition to ordering parts you might need to include other things on the purchase order. Things like taxes, freight, subcontractor fees and permits are not really inventory items but still need to be tracked.


To enter these things onto the purchase order create a purchase order normally. After entering the last inventory part on the purchase order, change the Type field to Account. In the Item field select the account that will be debited when the bill is created. Use the Description field to describe the goods or services being ordered. Enter the desired quantity and price if you know it. If the price for these items is unknown when you are creating the purchase order you can leave Price field blank.

If you do not plan on billing the customer for these charges directly you may want to assign these line items to a department or job so you can see the costs associated with the work you do there.

Example 1: We need to add sales tax to the purchase order. So we create an Account line that is affecting our Sales Tax Paid account, has a description of Sales Tax and has a quantity of 1 and a price of $19.83. We will leave the job and department blank since this purchase order was generated to restock our warehouse and we don't know which department or job they will be used on at this time.

Example 2: We know the vendor is going to charge us for shipping but we don't know what the exact charge will be until we receive their bill. In this case we create an Account line that is affecting our Freight expense account and has a description of Freight. We set the quantity to 1 and leave the price field blank. We know the parts on this purchase order are being ordered for our commercial installation department so we set the department to that as well.

Additional Information:

If you plan on importing these charges onto an invoice it may be worth setting up a Material type billing code (Sales → Enter Billing Codes) that has the same account in the Cost Debit and Cost Credit fields. This will allow the cost of the item on the purchase order to show on the invoice for reporting purposes, but will not affect your accounting in any way. This is a good thing since the cost will already go to your accounting software when you receive the item and create the bill for it.

Once you have setup the billing code, simply select it in the Billing Code for Miscellaneous Material field when importing a purchase order.

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