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Tax Templates in Sales Transactions

This page describes how Tax Templates will be chosen and offered as defaults in sales transactions, including Quotations, Sales Orders and Sales Invoices.

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Whenever you sell an Item, you will need to charge VAT and/or other sales tax in order to comply with local tax regulations. You will therefore need VAT/tax to be calculated in each transaction, and you will need to account for that VAT/tax in the Nominal Ledger.

In some countries (for example, most countries in Europe), each Item that is sold (e.g. each row in an Invoice) will be taxed at a single rate. In this situation, you can use VAT Codes to calculate and account for the tax. Each row in the Invoice will have its own VAT Code. For example, an Item that is taxed at the national standard rate will have a VAT Code that calculates VAT/tax at that rate, while a zero-rated Item will have a different VAT Code that calculates VAT/tax at a 0% rate.

In other countries (for example, Brazil and the US), each Item that is sold will be taxed using different taxes and/or several tax rates. In this case, you should use Tax Templates to calculate and account for the tax. A Tax Template allows you to apply several taxes to a single transaction (e.g. to a single row in an Invoice). A Tax Template is a tax structure, built up using a number of VAT Codes.

If you need to use Tax Templates, you should select the Use Tax Templates for Tax Calculation option in the Transaction Settings setting in the Nominal Ledger. Wherever a VAT Code (or "V-Cd") field would appear, this option will cause a Tax Template (or "T-Cd") field to appear instead. You should also decide whether to use the Combine Tax Templates from Items and Contacts option in the same setting: this option should be used if you sell into areas with different tax regimes (e.g. out-of-county sales in some states in the US).

If you are not using the Combine Tax Templates from Items and Contacts option and you sell an Item (i.e. you specify an Item in a row in an Invoice, Order, Quotation or other sales transaction), a Tax Template for that sale will be brought in to the T-Cd field on flip B of the sales transaction row. That Tax Template will be chosen as follows:

  1. The Sales Tax Template specified in the Contact record for the Customer will be used. Usually you would only specify a Tax Template for a Customer if you need that Tax Template to be used to calculate taxes in every Invoice issued to the Customer (e.g. if the Customer holds a certificate of tax exemption).

  2. If the sales transaction has a Price List, the Tax Template will be taken from the appropriate row for the Item or Item Group in that Price List.

  3. The Tax Template specified in the Item record will be used.

  4. The Tax Template specified in the Item Group to which the Item belongs will be used.

  5. The Tax Template specified on the 'Sales' card of the Account Usage S/L setting will be used.
In the cases of points 3-5, the choice of Tax Template will depend on the VAT Zone of the Customer, which you should specify on the 'Company' card of the Contact record for the Customer.

If you are using the Combine Tax Templates from Items and Contacts option, two or more Tax Templates separated by commas will be brought in to the T-Cd field on flip B of the sales transaction row. Usually one of these Tax Templates will represent the Customer and one will represent the Item.

  1. The Tax Template representing the Customer will be chosen as follows:

    1. The Sales Tax Template specified in the Contact record for the Customer will be used.

    2. The Tax Template will be taken from the Contact record for the Branch (Sales Tax Template field), and/or from the Delivery Address specified on the 'Del. Address' card of the sales transaction.

    3. The Tax Template will be taken from the 'Sales' card in the Account Usage S/L setting.

  2. The Tax Template representing the Item will be chosen as follows:

    1. If the sales transaction has a Price List, the Tax Template will be taken from the appropriate row for the Item or Item Group in that Price List.

    2. The Tax Template specified in the Item record will be used.

    3. The Tax Template specified in the Item Group to which the Item belongs will be used.

    4. The Tax Template will be taken from the 'Sales' card in the Account Usage S/L setting.
You will be able to override the choice of Tax Template in an individual sales transaction row if necessary.

Please refer here for more details about Tax Templates, including illustrated examples.

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