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Most taxes are a fixed price or a percentage based on inventory prices exclusive of labor charges. Contractor tax is a tax that is used for taxing an item that includes labor as well as the inventory item in the sale price, for example, when purchasing carpet at $15.99 per meter 'installed'. The tax is levied on the wholesale cost of the item instead of the retail price that includes the 'labor'.
The Setup Wizard's Contractor Tax command allows you to enable the use contractor taxes at the invoice level. For the tax to be applied to all items on the invoice, the invoice must be tagged as a contractor invoice. This option is best used when the majority of the inventory items you sell have labor charges included.
Alternately, the contractor tax can be set up as an separate tax, for example, tax 3 and set to be applicable only to certain inventory items, not the entire invoice. The specific inventory item record (Inventory Details window - Taxes tab) must have the PST (Tax 1) check box clear and Contractor tax (Tax 3) checked for tax to be applied when this item is placed on an invoice (contractor tax replaces PST). The Use Contractor Tax based on the Invoice must be disabled (check box is clear) for tax to applied to specific inventory items.
To enable use of Contractor tax on entire invoices, select Setup Tools> Setup Wizard> Taxes> Contractor Tax. The Contractor Tax window shown in Figure 1 appears.
Figure 1: The Contractor Tax window
Check the Use Contractor Tax based on the Invoice check box to enable this function and clear it to disable the function. When complete, click [Close] to accept your changes and close the Setup Wizard.
Once enabled the New Invoice dialog box displays a [Contractor Tax] button. For invoices you wish the contractor tax to be applied to, click the button. The Invoice Details window - Invoice tab also displays a Contractor Tax check box which is checked if you pressed the button on the New Invoice dialog box.
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