US Sales Tax on Orders

The tax rate charged on sales orders depends primarily on the customer location. If you're selling to a customer within the same state as your business, then you charge a tax amount depending on your city, county and state tax rates. Every location across the USA has different rates, so please consult your accountant for full advice. Please also note that US accounting within Brightpearl is accrual based - there is no option to use cash accounting when using Sales Tax in Brightpearl.

Brightpearl has a default tax code of "- Not rated", which is used for accounting transactions where tax is not relevant, such as bank transfers. You can't delete this code, but you can change the name if you like.

How it works

Sales tax is applied per line of a sales order using a tax code. A tax code applies a particular percentage rate that is used to calculate the amount of tax applicable to the individual line. The total tax amount on an order is the sum of the tax on each line.

Tax codes are applied to rows automatically but can also be edited and assigned manually. A row tax code is automatically assigned based on the tax code assigned to the customer record, but where they have no tax code, the product setting is used. A product is set as taxable or non taxable; a taxable product will use your company default tax code and a non taxable product will apply a zero rate using code "- Not rated".

Tax rules for determining the tax code used in Sales Tax mode

A complete tax breakdown will be displayed on the customer invoice showing the total tax amount per rate applied.

Tax and sales channels

Where an order has been downloaded from a sales channel such as eBay, Amazon or an ecommerce store, Brightpearl uses the tax amount which is given by the channel. The tax code for the order line is determined based on the same set of rules.

Tax exempt wholesale customers

In order to distinguish wholesale sales tax from retail sales tax in your profit and loss report, you can create a new tax code with a zero rate that is applied to wholesale customer records. When you add items to orders, the taxable products will inherit the [zero rated] customer tax code. Non-taxable products will still post into accounts as "- Not rated".

Point of sale

The Brightpearl iPad Point of Sale app has a number of settings to allow fine tuning of sales tax on a per-item, per-category, per-customer or per-store basis. Have a look at Settings > Brightpearl POS > Tax rules in back office.

For more information, see the help article on POS tax rules.

Setting up tax

A sales tax rate is typically made up from a number of components, such as City, County and State rates. The sum of all these rates is what you pay the IRS.

Tax components hold the tax rates (%) and are used for each tax reporting authority (City, County, State). Using a component breakdown allows you to get a full breakdown on your tax reports. If you only ever produce tax figures at the tax code level (i.e. all your tax gets paid to one authority who subsequently splits it out for you) you can simply create a component for each overall rate. If you're unsure you should create all the separate components as you will not be able to break down your reports later.

Tax codes are the made up from one or more components to create the total rate that will be applied each time the code is used. Different tax codes can share the same component so two different cities in the same state would share the state tax rate, but have their own city rate. It's the tax code which is used throughout Brightpearl - applied to customers and orders.

In this example the tax code for San Francisco is a combination of components giving a total rate of 12.25% (this is just by way of example, they are not actual figures):

taxcode

Setting up tax

To setup tax in Brightpearl you will need do the following in this order:

  1. Create tax components
  2. Create tax codes
  3. Set products as taxable or non taxable
  4. Give customer records a relevant tax code where required
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