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Reference - Taxes
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There are 4 steps needed to initialize the system to account for taxes, such as
sales tax. These steps are only performed once when the system is setup.
Step 1 - Use Menu selection System - Chart Of Accounts - Add Account
to setup a Liability Account for taxes you collect from customers, and which
you owe to a taxing authority.
The US_Service_Company default Chart of accounts comes pre-configured with a Sales Tax account as
shown below, but you may add any other account(s) for your business. Note that the 'Tax' checkboxes
are checked. |
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| Step 2 - Use Menu selection System - Taxes
to enter the tax rate(s) and calculation order for each of the tax accounts.
The system supports multiple tax types and rates. The 'Ordering' field indicates the order in which
taxes should be applied to the balance on an invoice. For example, the tax with Order '1' is applied first
and added to the outstanding balance. Then the tax with Order '2' is applied and added. The tax rate for each
is entered in the Rate field. In the basic case of a Sales tax, you may only need the Sales Tax account. |
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| Step 3 - Use Menu selection Customers - Edit Customer
to select your customers from which you will collect sales tax. Check the
appropriate Tax Account check box for the taxes to be collected. The tax types correspond to the
tax accounts you entered in Step 1, above. Shown below is a customer from whom we will collect just
the 'Sales' tax and not the 'Town' tax. |
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| Step 4 - Use Menu selection Goods & Services - Reports - All Items
to select a Good or Service. Check the
appropriate Tax Account check box for the taxes to be collected when this Good or Service is sold. The tax
types correspond to the tax accounts you entered in Step 1, above. Shown below is a part for which we will
collect just the 'Sales' tax and not the 'Town' tax. |
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| Now that the system is setup, each time you sell the taxable Good or Service to a taxable Customer, the selected
taxes will automatically be calculated and included in the invoice, and the corresponding liability account will
be Credited. Shown below is the Add Sales Invoice form with the taxable Customer and Good selected. Click the
'Update' button after making these selections and the system will automatically calculate and enter the tax. |
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Check the 'Tax Included' check box in the Sales invoice if the sale price already includes the tax. In this case,
no additional tax amount is added to the invoice. The Revenue account will be debited, and the Tax Liability account
will be credited, with the appropriate amounts such that the tax equals the revenue x the tax rate, and the total
of Revenue plus Tax will equal the invoice amount.
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