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.

Learn more about the VAT report.

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 > Tax > 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 > Tax > Tax settings. The default tax code is used by the tax rules for your specific tax scheme.

 

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