Tax Table

Overview

The Setup Wizard's Taxes command allows you to define a Tax Table with up to eight different taxes that the system uses for tax calculations. Taxes are date sensitive, which means you can define what date they take effect on or what date they changed.

Creating the Tax Table is the first task in configuring taxes. To complete the tax setup you then perform the following:

• define default tax names.
• specify the company tax number and create ledger codes specified while setting up the Tax Table.
• where applicable, specify tax (G.S.T.) credit information.
• where applicable, set up Contractor tax in two ways; either by flagging an invoice as a contractor invoice or by associating a Contractor tax to individual inventory items.
• where applicable, track the Duties and /or Tariffs owed Customs and associate individual inventory items with the appropriate code (s).

Alternately, you can import a pre-defined Tax Table but you need to perform the extra tax setup task in the above list as well.

Tax rates can change over time and other associated tax information may also change. When this happens, you need to edit an exiting Tax Table.

Access

To create or delete a tax table, select Setup Tools> Setup Wizard>Taxes> Taxes. The Tax Table window shown in Figure 1 appears.

Create a new Tax Table

There are so many variations to how taxes can be defined in the Tax Table. There are two sections to this instruction. The first section contains general information including some examples for: Tax tabs, Tax Zones, Tax Types, Tax Ranges, Ledger 1 and 2, and Tax on Tax. The second section provides examples of actual Tax Table set ups for Canada and the U.S.A.

General information

1.  Tax Tabs
   
   Each tax in the Tax Table is defined on a tab in the Taxes window which is normally set up as follows:

• Tax 1 is the State or Provincial tax
• Tax 2 is the Federal tax (GST)
• Tax 3 environment tax
• Tax 4 environment tax
• Tax 5 is an included tax of tax 2
• Tax 6 environment tax
• Tax 7 & 8 are ecological taxes and defined by the inventory item

2.  Tax Zones (areas)
   
   Physical tax regions can be represented by tax zones using a two alphabetical digits entered in the Areas column. The tax zones are the same for each tax you define (except ECO 7 & 8) taxes. See ECO taxes for more information. If you use tax zones, you must define each tax that you use with the same tax zones (Tax 1 - 6 tabs).
   HT has been reserved for use as the HST tax area in Canada. If you are using HST you should use this tax zone for regions that must charge HST. You can import a Tax Table that sets this tax zone for you.
   
   In the Customer Details window - Financial tab, select the tax area. This should normally be done in the Default Customers, and then when creating a new customer, and selecting your default customer, the settings are done for you.

   The tax rate charged is dependent on the invoice date and does not necessarily match the rate displayed on this tab.

3. Tax Types
   
   Each tax may one of the following types as entered in the Type column:

• a percentage of retail
• a percentage of cost (relates to contractor - on wholesale)
• a fixed amount
• a fixed amount to a maximum value or within a range (relates to Tax Ranges)
• a max or minimum amount based on a unit price (relates to Tax based on Unit Price)

• Allowable characters are: P, F, M, C, U/T/X, W, V

  

  Types P, F and M consider the invoice totals whereas type C, U, T, X consider the individual items on the invoice.

  Type V considers inventory volume while Type W considers the weight which can be the scale weight, invoice weight or inventory depending on your weight setting and the "sell by weight" flag on the inventory item.

  3.1  Tax Ranges (types M,U, T, X, W)

  Tax types M, U, T, X additionally require minimum and/or maximum values as entered in the Min and Max columns as follows:

• M = Maximum fixed amount; requires a value values in one or both the Min and Max columns considering the invoice amount and the rate is a fixed dollar amount.
• U = Percentage Min/Max tax based on unit price; requires values in either the Min and Max columns and the rate is a percentage of the unit price.
• T = Percentage Min/Max tax based on unit price minus the minimum; requires values in one or both the Min and Max columns and the rate is a percentage of the unit price.
• X = Fixed Min/Max tax based on unit price; requires values in requires values in one or both the Min and Max columns considering the unit amount and the rate is a fixed amount. (This is similar to type M only per item rather entire invoice
• W = Min, Max on a weight tax line is the minimum weight or maxium weight/measurement (if not zero).

• Type T and M examples

  You can also define a minimum and maximum subtotal range for a specific tax. The lower and upper ranges are defined in the fields under the Min and Max columns as shown in the example below:

  Tax1 tab

  Date Name Rate Type Min Max

  2003 Tax High 7.00 T 0.00 4999.99

  Tax2 tab

  2003 Tax Low 6.00 T 5000.00 9999.99
  2003 Tax Max 500.00 M 10000.00

  In the above example, the system charges 7% tax on the first $4999.99 of the invoice and then 6 % on the amount from $5000.00 to $9999.99. The third line places a maximum tax to charge of $500 on an invoice total over $10,000.00.

  The tax type 'T' is used for the U.S.A. Tennessee tax. This tax is a percentage based tax based on the unit price with a minimum of 1600.01 and a maximum of 3200.00. It is similar to the U type tax except that you subtract 1600.00 from the taxable amount. Here is how their taxes are set up:

  1. State sales tax 7% on everything.
  2. Local Article County Tax 1% to 2.75% on everything less than between $333 and $1600 (based on the county)
  3. State Article tax 2.75% on the amount over $1600 and less than 3200

  Therefore at Point of Sale:

  If an item price is $1500

  Tax 1 = 7% * 1500 = 105

  Tax 2 = 2.75 * 1500 = 41.25

  Tax 3 = na

  If an item price is $3000

  Tax 1 = 7% * 3000 = 210

  Tax 2 = 2.75% * (max 1600) = 44

  Tax 3 = 2.75% * (3000 - 1600) = 38.5

  If an item price is $4000

  Tax 1 = 7% * 4000 = 280

  Tax 2 = 2.75% * (max 1600) = 44

  Tax 3 = 2.75% * (max 3200-1600) =44

  Type U example

  Some governments have taxes that are only applicable on items priced over a certain dollar range, or are capped at a certain dollar amount. If you have this type of tax you can use "U" as the tax type. This tax type is not compatible with Tax Ranges and is not applicable to ECO Taxes. You can not have different tax rates based on the unit price, the min and max is only used to calculate the taxable amount.

  Tax applies to items only over $30: Set the Min Sub Total to $30 and the Max Sub Total to 0

  Area Effective Date Name Rate Type Tax On Tax Min Sub Total Max Sub Total

  2003/10/14 Tax 1 7.00 U N 30.00 0.00

  Tax is only taxable on the first $3500: Set the Min Sub Total to $0 and the Max Sub Total to $3500

  Area Effective Date Name Rate Type Tax On Tax Min Sub Total Max Sub Total

  2003/10/14 Tax 1 7.00 U N 0.00 3,500.00

4. Ledger 1 and 2
   
   Each tax has an associated liability account, and optionally dependent on government regulations, an associated credit account. Liability accounts are typically in the 2060 to 2080 range with 2060 being the default. Credit accounts are typically in the 1060 to 2080 range with 1065 being the default.

5. 0 Tax on Tax
   
   Most taxes are a fixed price or a percentage based on inventory prices exclusive other taxes. Occasionally a tax is charged inclusive of another tax. This is considered a Tax on Tax. For example, in the case of Tax A (being defined on Tax 5 tab) that charges inclusive of Tax B, in the Tax on Tax column type 'NY' . The Tax Tool dialog box appears for you to select the tax you wish to charge tax on (in this case Tax B).

You do not need to change Tax B from the Tax on Tax default of 'N'.

Canada and U.S.A. Tax Table examples

The following are examples of complete tax setups. These examples are for guidance only. You should consult your accountant or tax guide for the official rules and regulations regarding taxes in your area.

Tax example 1 - State tax

The example in the Figure 1 shows how a simple percentage type state tax of 7.0% is entered into the Tax Table using a liability Ledger 1 account 2060.

Figure 1: Simple State tax example

Tax example 2 - U.S.A. County taxes

In some states, each county is required to collect taxes for the other county on items delivered to or serviced in the other county. For this setup, you must define a tax area for each customer and assign the customer to that tax area.

Figure 2: USA County taxes example

Note: The yellow highlight means that you have not yet created the Ledger number indicated which you do in the Tax Number window after the Tax Table is complete.

Tax example 2 - common Canadian provincial and federal taxes (not including HST)

This example works for the majority of Canadian provinces having a simple percentage based Provincial Sales Tax (PST) set up as Tax 1 and a Federal Government Sales Tax (PST) as Tax 2.

Figure 3: Canadian Provincial Sales Tax (PST) as Tax 1

If you do not have tax credits for this tax you do not need a Ledger 2 account. The column is defaulted with a Ledger number so you should delete the number if it is not required.

Figure 4: Canadian Federal Government Sales Tax (PST) as Tax 2

Note: The red highlight means this tax has been used and changing the tax will cause invoice errors. The yellow highlight means that you have not yet created the Ledger number indicated which you do in the Tax Number window after the Tax Table is complete.

Tax example 3 - Canadian HST inside of an HST region

If all your customers are from your province and the federal tax includes collection of the provincial tax (Harmonized Sales Tax HST), you only need to set up Tax 2. Newfoundland, Nova Scotia, New Brunswick (replaces federal government sales tax GST with harmonized sales HST) and Prince Edward Island (PST on GST which is considered a Tax on Tax).

Note: The yellow highlight means that you have not yet created the Ledger number indicated which you do in the Tax Number window after the Tax Table is complete.

Tax example 3 - Canadian HST outside of an HST region

If your customer base is country-wide you may need to charge HST even though your province doesn't charge it. In this example from BC, all BC customers is assigned tax area BC, all customers in Newfoundland, Nova Scotia, New Brunswick is assigned tax area HST, and the rest of the country are blank or have no tax area.

Note: For the provinces of Newfoundland, Nova Scotia, New Brunswick you need to charge 15% HST, and the rest of the provinces as only 7% GST. You may need to still charge your own province's PST.

Tax 1 - PST

All customers in BC need to be charged 7% PST (this example is from BC), so every BC customer in tax area BC must be set up (this can be done through the use of Default Customers). Customers in the rest of the country are PST exempt so the rate is set at 0%. You could also just set the out of province customers as PST exempt on the customer record as well or instead.

If you do not have tax credits for this tax you do not need a Ledger 2 account. The column is defaulted with a Ledger number so you should delete the number if it is not required.

Tax 2 - GST / HST

All customers Newfoundland, Nova Scotia, New Brunswick (HT tax area) need to be charged 15% HST.

Customers in BC need to be charged 7% GST

All customers in the rest of the country need to be charged 7% GST. Because we have defined a BC tax area, we must put it in the tax table even though it is the same as the blank tax area.

If you sell out of the country, you can either (1) make a new tax area say US and set the PST and GST tax rates to zero or (2) set the customer to PST and GST tax exempt.

There are some products such as educational books that only have a 7% HST charge. This becomes much more complicated and requires the use of up to 4 different taxes.

Edit an existing Tax Table

Tax rates can change over time and other associated tax information may also change. Therefore, you need to change the information in the Tax Table to reflect the current rates and specifications. You do this by adding a new line to the appropriate Tax tab grid and all the up-to-date information.

• Warning: Do not delete the line representing previous rates for the tax as this causes errors with old invoices etc.

All tax rates that have been used on invoices are highlighted in red to indicate that deleting them would cause errors.

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