How to Record POS Deposits Correctly in Zoho Books to Keep Your Sales Tax Liability Accurate

Many business owners using a Point-of-Sale (POS) system notice a mismatch between the cash deposited in their bank account and the tax liability displayed in Zoho Books.

Common concerns include:

• “Zoho wasn’t recording sales tax liability correctly.”

• “My POS deposit minus fees doesn’t match Zoho’s tax report.”

These issues typically occur because the workflow of entering deposits, merchant fees, and sales tax isn’t aligned with how Zoho Books processes transactions. In this guide, we outline the correct process for recording POS deposits in Zoho Books (UK VAT & AU GST editions) to maintain accurate tax liability records.

What is “Sales Tax Liability” in Zoho Books?

In Zoho Books, Sales Tax Liability (or VAT/GST Summary in the UK/AU editions) represents the amount of tax collected from customers that your business owes to the tax authority.

• UK edition: Reports → Taxes → Tax Summary (VAT collected, paid, net VAT payable)

• AU edition: Reports → Taxes → GST Summary (GST collected, paid, net GST payable)

  
  

When you enable sales tax, create the correct tax rates, and assign them to sales transactions, Zoho Books will automatically calculate and record the tax portion in the liability account.

Setting up a new sales tax rate under Settings → Taxes ensures transactions include the correct tax, and liability is tracked automatically. (Photo courtesy of Zoho)

Why mismatches happen between POS deposits and tax liability

Some common, factual causes of mismatches include:

1. Rounding differences: POS systems may calculate tax slightly differently than Zoho Books.

   
   

2. Deposits include fees: Bank or merchant fees are often deducted before the deposit reaches your account. Recording the net deposit without separating fees can misstate your tax liability.

   
   

3. Sales without invoice: Recording POS sales as “Sales without invoice” without applying the tax rate may prevent Zoho from capturing the tax correctly.

   
   

4. Manual postings to expense accounts: Zoho’s proper tax workflow requires using the Tax Payment with Adjustment feature. Posting directly to an expense account can bypass the liability account.

How to record Zoho Books POS deposits sales tax liability (UK & AU editions)

Follow these steps to ensure your sales tax liability remains accurate in Zoho Books:

#1: Record gross sales with tax applied

• Create a sales transaction (Invoice, Sales Receipt, or “Sales without invoice”) in Zoho Books.

• Apply the correct VAT (UK) or GST (AU) rate to each item.

Note: Ensure your VAT/GST rates and rounding settings in Zoho Books match your POS settings.

#2: Record merchant/bank fees separately

• If your POS deposit is net of fees, record the fees either as a separate expense or a negative line in the sales transaction.

• This ensures your net deposit matches your bank account.

Note: Record bank/merchant fees as Expenses (e.g., Bank Fees) so the net deposit matches the bank statement.

#3: Reconcile bank deposits

• Import the deposit into Zoho Banking.

• Match it to the sales transaction and the expense (merchant/bank fees).

• The net deposit should equal the actual bank deposit, keeping your books accurate.

Note: Use Zoho Banking’s matching features to reconcile deposits accurately.

#4: Use Tax Payment with Adjustment for minor differences

• For rounding differences or small discrepancies, use Taxes → Tax Payments → Record Payment with Adjustment (in some regions or roles, this may appear as Accountant → Tax Payments → Record Payment with Adjustment).

• Apply positive adjustments to an Expense account and negative adjustments to an Income account.

Note: Use this adjustment flow for small rounding differences; do not manually post to the tax liability account. Consult an accountant for corrections involving closed periods or large amounts.

What to do if figures still don’t match

• Confirm your POS tax rate and calculation method (inclusive vs exclusive, rounding) match Zoho Books.

• Compare totals using Tax Summary / GST Summary reports.

• Avoid posting straight to the tax liability account unless guided by a professional.

• Consult your accountant or a Zoho Partner for complex issues, especially if it involves closed periods or large sums.

Final checklist

• Record sales with tax applied.

• Account separately for merchant/bank fees.

• Reconcile bank deposits to match net cash.

• Review VAT/GST Summary reports monthly.

• Use Tax Payment with Adjustment for minor rounding discrepancies.

By following these steps, your POS deposits, fees, and sales tax liability will align correctly in Zoho Books.

Mini FAQ: POS Deposits & Tax Liability

Q1. Why can’t I select “Sales Tax Liability” manually when adjusting?

A: It’s system-managed. Use the Record Tax Payment with Adjustment feature for small differences.

Q2. My POS deposit includes fees, and the tax liability is off by a few cents. What should I do?

A: Record gross sales with tax, record fees separately, and match the net deposit. Use the adjustment feature for rounding.

Q3. Do I need a manual journal entry every time I reconcile a POS deposit?

A: No. Only if there is a discrepancy, like rounding. Standard workflow covers most cases.

Q4. Which report shows what I owe in sales tax?

A: Tax Summary (UK) / GST Summary (AU). Shows taxable sales, non-taxable sales, tax collected, and net payable.