Tax : introduction

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.

    See the sales tax code rules

  • 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.

    See the VAT tax code rules

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

Tax principles

Every row on an accounting journal is assigned a tax code. In this example, taxable products to the value of $660 have been sold, with a tax value of $7.98. The tax code is ATX.

Screen_Shot_2019-07-16_at_1.54.55_PM.png

If a sales invoice or bank receipt has tax, then the tax is put on the 2200 Sales Tax account.
If a purchase invoice or bank payment has tax then the tax is put on the 2201 Purchase Tax account.

Sales receipt journals (money allocated against a sales invoice) do not have a tax component. The same is true for purchase payments (money allocated against a purchase invoice).

There are two reserved tax codes for cases where tax is not relevant (such as the entry to 1100 Accounts Receivable in the example above);

T9 for UK / VAT mode accounts
- (not rated) for US Sales Tax mode accounts

Tax configuration

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:

Tax components (eg 1.5%)

Multiple tax components make up a single tax amount. A tax component can be assigned to multiple tax codes.

Read more about tax components.

Tax codes (eg Z, T4)

This is the tax rate assigned to products, customers or vendors. The percentage rate is defined by the tax components chosen.

Read more about tax codes.

Tax zones (eg Europe, United States) 

Used in VAT mode only

One or more countries are assigned to a tax zone. Every country to which you sell must have a tax zone.

Read more about tax zones.

Tax regimes (eg Germany VAT)

Used in VAT mode only

Tax regimes are used for segmenting your tax reporting; they allow you to group tax codes together, and show only transactions for those tax codes on various reports.

Read more about tax regimes.

Point of Sale

The Brightpearl iPad POS has additional tax settings, which allow detailed rules per item, per category, per store, per customer and so on.

Read how to set up tax for POS.

Have more questions? Submit a request