thread Calculating Use Tax in Orders, Menu Items, Catalog & Fulfilment

Calculating Use Tax

True_Vine — Sat, 20 Sep 2025 09:31:24 GMT

If I use an item out of my inventory, I owe use tax on the amount I paid wholesale for the item. Does Square have a report on the items pulled from inventory and used in the store so I can calculate the use tax I owe?

Re: Calculating Use Tax

TheRealChipA — Sat, 30 Aug 2025 00:34:45 GMT

Hi @True_Vine. Can you provide a little more information since there are a couple of ways to “use” these items in your POS? When you pull an item for use, how do you record that in your POS, so that inventory is reduced?

Re: Calculating Use Tax

True_Vine — Wed, 03 Sep 2025 19:37:13 GMT

Hi @TheRealChipA. I just started and am trying to figure it all out so I may be missing something or unsure about how best to explain, but here goes:

I have 3 bottles of win in my inventory. I open one for a potential client and we drink it while trying to get their business. On the Square terminal, I start a transaction and use a 100% discount to remove it from my inventory.

Now I owe the state 8.25% tax on the wholesale price of the bottle since I used it without selling it. Since there was no transaction, the sales tax wasn't paid into my account but I still owe the state so I need to know the monthly total of bottles I've comped to potential customers. BTW, should I be using the comp feature instead of the discount?

Thanks

Re: Calculating Use Tax

TheRealChipA — Wed, 03 Sep 2025 20:06:01 GMT

@True_Vine It wouldn't matter how you discount it, really. But you did answer my question -- you record it using effectively a 100% discount of some time, be that a discount code or a comp. My suggestion would be this.

Create a discount code that you ONLY use for this purpose. It will be a 100% discount, manager locked so that your employees can't use it "by mistake." LOL. Use that code to discount these items. Then, at the end of the month, run a discount report to get the total of items you discounted this way. Manually compute the extra use tax and either record it on a separate line in your monthly remittance, or add it to the other numbers. My state has a separate use tax line specifically for this purpose, so that it doesn't get lumped in with the other numbers. Just follow your state's rules on this and you'll be fine.

I hope that helps, but let me know if you have any other questions.