Advanced Taxing - Tax on Tax
- Mahnoor Khan (Deactivated)
- Greg Walsh
Summary
Some countries or states require a tax to be applied on top of a already taxed charge, in EngageIP these taxes are configured with the 'tax on tax' setting.
Configuration
To configure tax on tax:
In the AdminPortal load the Setup menu
Click on Tax Rates
Click on an existing tax rate or add a new one
Enable the Tax on Tax option
Click Save
Tax on Tax Example
Tax on tax scenarios used to be applied in certain Canadian provinces, Quebec for example charged a sales tax on the selling price of an item after GST was charged. The content below shows how the tax on tax behavior worked when Quebec Sales Tax (QST) was applied to a service charge after other taxes (GST) were already charged.
Notice: When enabling tax on tax the tax will be applied only after all other standard taxes are calculated and applied.
The tax code for Quebec will now resemble the image below.
When the tax code is applied to an account, the taxes calculated are as shown below.
And the invoice may look something like this.
the GST (a non-'tax on tax' rate) is applied first to the $30.00 service at a rate of 6%, resulting in a GST charge of $1.80
the QST (a 'tax on tax' rate) is applied only after all standard taxing is completed. Configured as a tax on tax rate it applies to the already taxed total of $31.80. The QST rate is 8% resulting in a QST charge of $2.54
Checking the Taxes Payable report will summarize the charges