For specific Tax settings for you country, see the articles in this Tax management section.
The system can be configured to manage, track, and report both of the most common types of tax systems specifically:
Input-Output Tax: e.g. Value-added tax a.k.a. VAT (UK), known in some countries as a goods and services tax a.k.a. GST (Canada). The business pays the Tax authority the difference between the output tax and input tax collected and paid. If the amount is positive, or it can apply for a tax refund if the amount is negative.
Output Tax: e.g. Sales Tax (USA). A tax that a seller adds to a buyer’s bill when they sell particular goods or services. The business pays the sales tax it collects to the relevant Tax authority.
Tax Authority is modeled by the system as a Supplier, and entity to which it most often makes payments, and from which it sometimes gets refunds 😉
Tax codes identify and model how a line Item is taxed e.g. S = 10%. Tax codes calculate and cause the recording of Tax collected for a Tax Authority, e.g. Colorado’s state sales tax is 2.9%.Tax codes are assigned to a Tax Authority. VAT in the UK is 20%, a typical Tax code for this would be ‘STD’, Standard Tax Rate.
Tax groups are combined Tax codes. Tax groups model the collection of multiple taxes. For example, Arkansas has a state sales tax of 6.50%. City taxes range from an additional 0.25% to 3.5% and county taxes could be as much as 3.25%. The state sales tax rate in New York is 4%. All counties, by default, are authorized to collect an additional 3% sales tax on top of the state’s 4% levy.
Item Tax Options
Tax Options are available on Item Masters. Item Tax Options determine and indicate if a Line Item is Taxable (or not). You can assign a default Item Tax Option to an Item. When the Item is used in a Document this setting will override the Document preset Tax treatment.
Tax Liability Account
Tax Liability Account on the General Ledger is used to track all taxable transactions. This account and it’s naming is configurable.
Tax Reporting for VAT and USA Sales Tax are available as standard in the system. If you need a specific report for a region or country covered here, please contact the support team.
Tax Automation is supported in the system. You can add and configure a TaxJar account. See TaxJar automation in this section.