Overview
Sales taxes are calculated based on the Tax Code and Tax Type assigned to a quote/sale.
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Tax CODES are the percentage of tax to used in the tax calculations. (Think "tax rate")
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Tax TYPES are the factor that determines which parts of the job are taxable. (Material Only, Total Sale, Tax Exempt, etc) There is a list of the Tax Types definitions at the end of this article.
Instructions
Tax Codes Versus Tax Types Video - 3 Minutes
*version shown in video is v21b1.20
Tax Codes Have Two Components
1) Tax Authorities
Tax Authorities are those governing bodies to which you must report or remit taxes. They get set up in the system along with each of their unique tax rates.
For Example: Sales in the City of San Diego are currently charged 7.75% sales tax rate. This is a combination of several different tax components as seen at the State's online tax table:
If you have to report or remit to each Tax Authority, then you'd set up 4 different Tax Authorities:
State of CA = 6%
San Diego County = 0.25%
San Diego Co Local Tax = 1%
San Diego District Tax Sp = 0.5%
1.5) Creating Tax Authorities Video - 6 Minutes
*version shown in video is v21b1.20
2) Tax Codes
Then those different authority components get blended into one Tax Code: SanDiego City = 7.75%
In the system, the TAX CODE assigned to a quote or sale and will affect the tax calculations on the job. When thinking of a Tax Code, think of the total Tax Rate (%).
2.5) Creating Tax Codes Video - 5 Minutes
*version shown in video is v21b1.20
Tax Types Definitions
The Tax Type determines which part(s) of the sale is eligible to be taxed.
- Total Sale - calculated on the Sell Price Grand Total (material and labor). It is presented to the client on the printed quote/sale/invoice. At time of AR Invoice creation, a general ledger posting is made to Sales Tax Payable Liability ledger.
- Material Only - calculated at the Sell Price level for material only. It is presented to the client on the printed quote/sale/invoice. At time of AR Invoice creation, a general ledger posting is made to Sales Tax Payable Liability ledger.
- Tax Exempt - no taxes are calculated at all. At time of AR Invoice creation, no posting is made to Sales Tax Payable Liability ledger.
- Silent Use - calculated on the COST of the material only. It is not presented to the client. At time of AR Invoice creation, no posting is made to Sales Tax Payable ledger. This is where Taxes Self-Assessed comes into discussion.
- Silent Use + Freight - calculated on the COST of the material plus Freight 1 only. It is not presented to the client. At time of AR Invoice creation, no posting is made to Sales Tax Payable ledger. This is where Taxes Self-Assessed comes into discussion.
See also the Knowledge Base Article for
Sales Tax Reports.