Understanding and Using Sales Tax Codes
The Sales Tax Code form is used to create a tax code that will indicate whether or not to calculate sales tax for the tax item selected. They are also used to organize your sales tax liability. When printing certain reports, you can see your tax liability by sales tax code. Sales tax codes might be thought of as a “tax category” that also includes a switch to calculate sales tax or not.
Sales tax codes may be set on the Customer:Job form and or the Invoice Item form. They can be overridden when creating invoices and estimates.
Default Sales Tax Codes
Two tax codes are automatically created in Total Office Manager: TAX (taxable) and NON (non-taxable). TAX is used for items and customers that you need to collect tax for. NON is used for items and customers that are exempted from tax such as non-profit organizations, out-of-state sales, or items that your customers will resell.
When you select the “Non” tax code, no sales tax is calculated. This is true even if you have a sales tax item selected.
Users can delete sales tax codes. If you do not have these two, you may need to reenter them. You may enter as many as you need.
Sales Tax Code Form Access
From the menu option Customers | Sales Tax | Sales Tax Code List, right-click anywhere on the list and choose New Tax Code from the pop-up menu.
From a Tax Code drop-down, you may choose <Add New>. Tax Code selections may be found in the following locations:
- Customer:Jobs Company Preferences
- Items Company Preferences
- Customer:Jobs Tax Info Tab
- Items Accounting Tab
- Estimate/Sales/Invoice/Credit Forms
Field & Button Definitions
- Sales Tax Code – The Sales Tax Code field is used to enter an abbreviation for the sales tax code. Common usage includes TAX for taxable sales, NON for nontaxable sales, CHU for church organizations, GOV for government agencies, LBR for labor only items, EXE for exempt sales, etc. This entry may be up to a three-character abbreviation to define and classify a tax code.
- Description – A short explanation of the code. This field may be up to twenty (20) characters in length.
- Apply Sales Tax To This Tax Code – When this option is checked, the tax code will calculate sales tax for the tax item selected. When the option is not checked, the tax code is considered non-taxable.
- Inactive – Check this option to inactivate the sales tax code.
- OK – This button saves the information and closes the form.
- Cancel – This button closes the form without saving.
- Next – This button will save the current tax code and start a new blank form for entry.
- In Total Office Manager, the Tax Code on an Invoice Item supersedes the Tax Code set on an Estimate/Invoice/Sale/Credit. This is the correct functionality. If the Customer Tax Code is to always be the primary, users are to set the preference for this behavior under Edit | Preferences | Sales/Invoices/Estimates | Company Preferences | Customer:Job Tax Code will Override the Item’s Tax Code Selection.
- We usually recommend NOT setting a Tax Code in the items unless the item is never to be taxed. An example: Labor is not taxable unless it is fabrication labor. When the tax code is blank on the item and placed on an invoice with a customer that is taxable, the customer tax code will populate. When the item tax code is marked as non-taxable and placed on a customer that is taxable, the item is not taxed. In the instance the preference is set to override with the Customer:Job Tax Code, the non-taxable item will then be taxed.