Tax configuration

Tax schemes

Brightpearl supports two tax schemes; sales tax and VAT. The selected scheme controls the tax rules used for applying tax codes and rates to orders.

  • Sales tax

    Sales tax mode provides sales tax reports. When in sales tax mode, the tax engine will apply sales tax rules when assigning tax codes to orders.

  • Value Added Tax

    VAT mode supports the standard and cash schemes for VAT reporting. When in VAT mode, the tax engine will apply VAT rules when assigning tax codes to orders.

Your tax scheme is set by your Implementation Consultant when your Brightpearl account is created. View your tax scheme at Settings > Company > Accounting: Tax.

Tax configuration levels

Tax configuration involves several levels of setup, each of which should be configured before you begin using Brightpearl to manage your accounting. These levels are:

  • Components
  • Codes
  • Zones
  • Regimes

Tax components

Tax components hold individual tax rates which are used to make up the total rate on a tax code.

In the US, sales tax reporting is broken down by tax component to provide figures for each level of government. For example, you may have components for state, county and city.

For VAT reporting, tax codes typically require only a single component.

 How to add tax components:

  1. Go to Settings > Localization > Tax components
  2. Click the Add a new tax component button
  3. Enter a name for the component
  4. Enter the rate applicable for this component
  5. Click the Save button

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Note: once a tax component is in use, it cannot be edited.

Tax codes

Tax codes are assigned to contact records, product records and transactions. They control the total tax rate applied to a transaction. This total rate can be made up of multiple tax components, a single component, or no component at all (such as exempt or zero rated tax codes).

In the US, where components for each level of government are required, each component is added to the tax code. For example, the total tax rate could be 10.5% made up of state at 9%, county at 0.5% and city at 1%.

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For VAT reporting, tax codes require only a single component, e.g. standard at 20%.  In VAT mode please be aware there are a few special tax codes needed for VAT reporting.

How to add a tax code:

The required tax components must be created first. Once components have been created, the codes can then be set up.

  1. Go to Settings > Localization > Tax codes
  2. Click the Add a new tax code button
  3. Enter the tax code and a name
  4. Select the tax components (rates) applicable to this tax code. The total rate of the tax code is displayed at the bottom
  5. Click the Save button

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Note: once a tax code is in use on products, contacts, orders or accounting, it cannot be edited.

A default tax code is defined in Settings > Company > Accounting: Tax. The default tax code is used by the tax rules described here.

Tax zones

Tax zones are a way to group countries for tax purposes. A zone can include one or multiple countries; an example is 'Europe (EU)' which could include all member states of the European Union. 

Optionally, a tax code can be assigned to a zone. In VAT mode accounts, the zone then influences which tax code is automatically assigned to downloaded sales orders based their the delivery address country. The tax zone's tax code is only used where the customer record does not have a default tax code assigned. If a zone does not have a tax code, then the product's tax code is used instead. Tax rules are discussed in more detail here.

How to add a tax zone:

  1. Go to Settings > Localization > Tax zones
  2. Click the Add tax zone button
  3. Enter a name for the tax zone
  4. Select a tax code applicable to this tax zone. If no tax code is assigned to the zone the product tax code will be used on transactions (VAT mode only)
  5. Click the Save button

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How to assign a country to a tax zone:

  1. Go to Settings > Localization > Countries
  2. Click to edit button next to the relevant country
  3. Select the tax zone applicable to this country
  4. Click the Save button

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Tax regimes

A tax regime acts as a category for your tax codes. It allows you to group tax codes together and report on transactions belonging to these groups using report filters.

Default tax regimes are already configured in your Brightpearl account, so you only need to create new regimes if you report tax in more than one country and wish to segment reporting by these separate tax liabilities. This is especially relevant in VAT mode accounts where you may need to exclude certain tax codes from the VAT return. The VAT return will only include transactions assigned to tax codes in the "VAT" tax regime and will exclude anything else.

Currently, all tax codes display on the US sales tax reports, i.e. these reports are not affected by tax regimes.

How add a tax regime:

  1. Go to Settings > Localization> Tax regimes
  2. Click Add tax regimes
  3. Enter a name for the regime and choose the tax codes that make up the regime
  4. Click the Save button

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