No Sales Tax on the Invoice? Flag Use Tax When You Approve in Slack

Someone in #purchasing asks for a $4,000 monitor order from an online seller. The approver checks the budget, says yes, and the invoice lands in QuickBooks or Xero with no sales tax line. Nobody notices, because a smaller total looks like good news.

It often isn't. In most US states, when a seller doesn't charge sales tax on something taxable, the buyer owes use tax on it instead. That bill shows up later, usually during an audit, with interest and penalties on top. The cheapest place to catch it is the moment the purchase is approved, while the request still says what is being bought and where it will be used.

What use tax actually is

Use tax is the buyer-side twin of sales tax. Washington's Department of Revenue puts it plainly: items used in the state are subject to either sales tax or use tax, "but not both on the same transaction" (Washington DOR). Stripe's explainer says the same thing from the other side: sales tax is collected by the seller, and use tax is paid directly by the buyer when the seller doesn't collect it, typically on purchases from out-of-state or online sellers (Stripe).

Sellers skip the tax for ordinary reasons. Remote sellers under a state's economic nexus threshold don't have to collect. North Carolina, for example, requires out-of-state retailers to collect once they pass $100,000 in sales sourced to the state (NCDOR). Below that line, the obligation shifts to you.

The rate is generally the same as the sales tax that would have applied where the item is used. Minnesota says its use tax and sales tax rates are identical (Minnesota DOR, FS146). Pennsylvania charges 6% state plus 1% local in Allegheny County or 2% in Philadelphia (PA Department of Revenue).

Why it belongs on the approval, not at close

Use tax is a purchase-intake problem that usually gets handled as a bookkeeping problem. By the time AP sees the bill, the context that decides the answer is gone: what the item really was, which office it shipped to, and whether the seller's "no tax" was a mistake or a nexus gap.

The states are fairly blunt about the risk of ignoring it. Pennsylvania notes that many businesses think they save money on "tax-free" out-of-state purchases, but those transactions "are often assessed upon audit," and the assessments include interest and penalty, so the business ends up paying more (PA Department of Revenue). Stripe also points out that use tax compliance is a regular focus of state audits, especially in construction, manufacturing, and SaaS (Stripe).

Minnesota goes further and says businesses are required to set up a system to record and pay use tax, such as a use tax accrual account or a folder of invoices subject to use tax (Minnesota DOR, FS146). A Slack approval thread that captures the right three facts is most of that system.

Three fields to add to the Slack request

One AP-focused guide boils the accrual decision down to three questions screened at invoice entry: is the item taxable in the state where it will be used, did the vendor charge sales tax, and what is the combined rate there (AutoPayables). Move those questions up to the request:

1. Ship-to or use location. The state and city where the thing will be used, not where HQ is. Rates and taxability follow the point of use.
2. Does the quote include sales tax? Yes, no, or unknown. "No" on a taxable item is the flag.
3. What category is it? Hardware, furniture, supplies, a service, or software. Taxability varies a lot by category and state.

The requester knows all three when they ask. Finance usually knows none of them when the bill arrives.

Software is where it gets messy

Don't assume software is always taxable or always exempt. California says electronically downloaded software isn't subject to its tax when no tangible storage media is obtained (CDTFA). Colorado has its own software rules and says that if a software purchase is exempt from sales tax, it is generally exempt from use tax too (Colorado DOR). Pennsylvania's examples even include an out-of-state pest control service that didn't charge tax, which still triggers PA use tax (PA Department of Revenue).

It can also cut the other way. Kroll's Q2 2026 tax insights note that vendors often apply the billing state's rate to an entire software contract, even when users sit in states with lower rates or no software tax. The correct approach is to allocate by where the software is actually used (Kroll). If the request records seat counts by location, you can catch overcharges as well as under-collection.

The practical rule: when the category is software or a service, route the request to whoever owns tax, or your outside accountant, before approval, not after.

Booking it in QuickBooks or Xero

Neither tool does this for you out of the box.

• QuickBooks Online. A QuickBooks Community answer describes the usual workaround: create a Use Tax Payable liability account, create a service item mapped to it, and add a second line for the use tax when you enter the bill or expense. Then pay the liability when you remit (QuickBooks Community). QBO Support's own notes say QuickBooks Online doesn't automatically track use tax on purchases where tax wasn't collected (QBO Support).
• Xero (US). Be careful with tax rates on bills. An accounting firm's Xero guide warns that a use tax rate above 0% on a purchase posts against Sales Tax Payable and reduces the liability. Their fix is a 0% "Use Tax" rate to tag the transactions, with the actual amount handled separately (Accounting for Jewelers). A user-submitted use tax request on Xero's product ideas forum describes the same need for a dedicated use tax liability account (Xero Product Ideas).

Either way, the Slack approval should carry the flag through to the bill so whoever books it knows to add the accrual, at the rate for the location on the request.

Filing deadlines differ by state

The accrual is only half the job. Remitting depends on the state:

• Pennsylvania: registered sellers report use tax on line 6 of the sales and use tax return. Others can file a PA-1 use tax return by the 20th of the month after the purchase (PA Department of Revenue).
• Colorado: businesses with less than $300 of consumer use tax for the year file annually by January 20. Above $300 at any month-end, a return is due by the 20th of the next month. Late payment carries a 10% penalty plus 0.5% a month, capped at 18% total (Colorado DOR).
• California: eligible businesses can report on their state income tax return, due April 15 after the purchase year. "Qualified purchasers" with more than $10,000 of use-tax purchases a year (2024 through 2028) must report directly to CDTFA (CDTFA).
• Washington: businesses report use tax on the excise tax return in the period the goods are first used in the state (Washington DOR).

With year-end coming, annual filers like Colorado's small accruers have a January deadline. A year of Slack approvals tagged "no tax charged" turns that into a filter rather than a hunt through twelve months of invoices.

A checklist for this week

• Add ship-to or use location, "tax on quote: yes/no/unknown," and category to your purchase request form.
• Treat "no tax" on hardware, furniture, or supplies from an out-of-state seller as a flag the approver sees.
• Send software and service requests to whoever owns tax before approval.
• Set up a Use Tax Payable account in QuickBooks, or a 0% tagging rate plus a liability account in Xero, and book the accrual when the bill is entered.
• Keep the invoice, the taxability call, and the rate used with the approval. AutoPayables notes that an auditor's first question is why you concluded what you did (AutoPayables).
• Check your states' deadlines now, before the January rush.

This post covers process, not tax advice. Taxability and rates vary by state and locality, so confirm specifics with your state revenue department or your accountant.