Undefined "State Sales Tax" appearing in Reports

[lennys26]

In my Tax reports (Reports -> Accounting -> Taxes), I notice that there is a tax called "State Sales Tax" being reported. This tax is NOT defined in my list of tax rates.

Can anyone tell me what this is and where it is defined?

Based on the calculations, it appears to be a 0% rate, so I am thinking that this is actually the items with no tax rate selected however without the "Non-taxable item" option selected (something that I have previously flagged as being a confusing configuration in Square).

[Summer2024 · Accepted solution]

Hi, @lennys26 ! 

State Sales Tax” at 0% is not an actual tax rate you created. It’s a reporting placeholder Square uses for items that are taxable-capable but did not have a tax applied at the time of sale.

What “State Sales Tax (0%)” actually represents

In Square tax reports:

• Defined tax rates (e.g. “CA Sales Tax 7.25%”) appear as expected

• Items with no tax applied, but not explicitly marked as non-taxable, are grouped under a 0% tax line item

• Square labels that line item using the default tax name for your region, often:

  • “State Sales Tax”

  • “Sales Tax”

  • or similar

This happens even if that tax does not exist in your tax settings.

How to prevent this going forward (if you want cleaner reports)

Option 1: Explicitly mark items as Non-taxable

For items that should never be taxed:

• Go to Items

• Edit the item

• Turn tax OFF and mark it as non-taxable

These will then appear cleanly as non-taxable sales, not under a 0% tax line.

Option 2: Ensure taxable items always have a tax applied

If an item should be taxed:

• Make sure the correct tax rate is selected

• Especially important for new items or imports

I hope this helps! 

[lennys26]

Hi @Summer2024 .

Yep - just as I suspected then. I will have to now go through all of my items and correct this/make this change.

I will point out, however, that the concept of “non-taxable” does not exist in the bulk Excel configuration file. In that file, you can only enable or disable the individual configured taxes. This means that I will need to go through my entire catalog manually one by one will be quite time-consuming.

[lennys26]

@Summer2024  Just to close the loop on this thread and update it for other users:

I have now reviewed my full inventory via XLS export and can confirm that there are no items without an associated tax rate, other than those explicitly marked in the UI as "Non-Taxable." Based on this, it does not appear that items lacking a tax assignment are the cause of the "State Sales Tax" figure in my reports.

After further investigation, it seems these amounts may be related to Uber Eats orders flowing through my integrator (Stream). That said, the totals shown under "State Sales Tax" do not align with the corresponding order values, so the reporting logic is still somewhat unclear.

Since Uber Eats processes the customer payment, I believe it is ultimately correct that no tax is due on my side. However,

I would expect Square to present this differently, and at the least, not label this as "State Sales Tax", which is both misleading (at best) and, specifically in my case, confusing, since I am an international user and we do not have "states" as such.