Setting Up Tax for Your Products.

Taxes are derived from products and charges. Not all the products and services have the same tax rate. There are tax exempt products and there are products or services to which a higher tax rate is applied.

A tax category allows to group and manage similar products or services tax rates. Each tax category must have at least one tax rate. By default, a standard tax category with rate of 15 is created. If you want to create other tax category or rates this is how you do it.

Create A Tax Category

Go to Administration → Tax

Click on the add button to create new category

1. Fill in the details.

2. Enabling the default option will make this category the default for this organization.

3. Click on Save.

Creating A Tax Rate for The Category

Toggle the tax category drop down

In the Tax rate page', you can search for existing tax or create new one.       

                            

By default, some of these taxes are created

Click on the create new button

• Enter the name of the Tax rate.

• The Tax Category provides a method of grouping similar taxes. For example, Sales Tax or Value Added Tax. Choose the tax category from the drop down.

• The Valid From date indicates the first day of a date range.

• The Parent Tax indicates a tax that is a reference for multiple taxes. This allows you to charge multiple taxes on a document by entering the Parent Tax.

• Rate indicates the percentage to be multiplied by the source to arrive at the tax or exchange amount. Enter the rate for eg: 15 for 15%

• SO / PO Type: Sales Tax applies to sales situations, Purchase Tax to purchase situations

• The Default check-box indicates if this record will be used as a default value. For example, setting this tax as default will list this tax while creating a product.

• Click on the active check-box.

• SO Tax exempt: Business partner is exempt from tax

• The Requires Tax Certificate indicates that a tax certificate is required for a Business Partner to be tax exempt.

• Document Level: Tax is calculated on document level (rather than line by line)

• Sales Tax: This is a sales tax (i.e. not a value added tax). If selected AP tax is handled as expense, otherwise it is handled as a VAT credit.

• Summary Level: This is a summary entity A summary entity represents a branch in a tree rather than an end-node. Summary entities are used for reporting and do not have own values.

• Tax Indicator: The Tax Indicator identifies the short name that will print on documents referencing this tax.

• Click on Save.
  

Tax Account details