Once they're set up correctly, taxes associated with the products you sell are handled automatically by the system. How you set them up involves understanding the idea of "Tax Groups" and whether or not you have any products where the tax is determined by the location of the customer or customers tank (Point of Sale) and not your company location.
IMPORTANT: For a tax to be applied to an individual transaction in a batch, it must be applied to BOTH the product AND the customers account.
By the way, it may seem like setting up taxes is unnecessarily complicated. Unfortunately, all of this is necessary for the system to handle all the different types of taxing combinations you may encounter (either now or in the future). The good news is that taxes change rather infrequently. This means that, once you set them up, they pretty much stay the same.
Before you set up your Tax Groups and individual Taxes, it's a good idea to check with your accountant to verify that they are set up and applied correctly. For instance, should taxes be set up based on Point of Origin and/or Point of Sale? If so, for which products and under what circumstances?
Many products have only a single tax. However, it's not that unusual to have multiple taxes associated with a given product. The system automatically handles both of these situations for you if you make sure that ALL taxes are associated with a "Tax Group". Here's the way it works:
1. Set up all of the individual taxes that apply to your customers. See Add a Tax for details.
2. Set up a Tax Group for each combination of taxes you have. See Add a Tax Group for details.
3. Assign one or more individual taxes (as appropriate) to each Tax Group. See Assign a Tax to a Tax Group for details.
Here's the rule for adding taxes to a Tax Group: Add the tax if it ALWAYS applies OR IF IT SOMETIMES APPLIES (as determined by who the customer is). Do not add the tax if it NEVER applies.
4. Assign a Tax Group to each account. See Assign a Tax Group to an Account for details.
5. Check each of your products to make sure the taxes assigned are correct. For example, you may have a situation where you have a Motor Vehicle Fuel product that is exempt from state sales tax. In that case, you would "un-check" the state sales tax (so that it does NOT apply) and "check" the MVF tax (so that it DOES apply) for that particular product. See Add Taxes to a Product for details.
After you've set up all of your individual taxes and assigned them to their corresponding Tax Groups, make sure you do the following . . . this is necessary to make sure that your tax reports are accurate and that the reports properly identify which taxing districts the product was sold in (whether tax was charged or not).
Most of the time the tax you apply when you sell one of your products is based on the location of your business. This is known as a Point of Origin tax.
However, you may have products (like tank rentals) where the taxes are applied based on the location of the customer or (more likely) the customers tank. This is known as a Point of Sale (or POS) tax. If this is the case, do the following:
1. If you have ANY taxes that are based on the location of the customer (that is, a POS tax), you need to let the system know by choosing "Yes" under Company Preferences:
See Set Up Company Preferences (Accounts Receivable) for details.
2. When you choose "Yes" to this preference, two things will happen:
See Assign a POS Tax to a Tank for details.