Tips for Using Direct and Gross Profit Sales Tax Items
If you have any Sales Tax Items setup to calculate based on an Items Direct Cost or Gross Profit you will need to keep the following information in mind, as they will have an effect on your Sales Tax Calculations.
When using Serialized Items, the Cost works on Actual Serial Number cost. You must Receive or purchase a Serial number before it can be sold (Invoice or Sale) to a Customer.
When you enter an Item Receipt, Bill, Check, or Credit Card Charge for the Item, the amount on the transaction entered for the Item will be placed into the Cost field on the Invoice/Sale. If at anytime you return to the transaction or convert the Item Receipt to a Bill and modify the amount in any way, the software program will automatically update the Serialized Items cost in the Invoice/Sale so that the correct amount is populated to your Job Costing Reports and removed from your Asset account.
This could cause your Direct Cost or Gross Profit sales tax calculation to be different from when the Invoice was originally entered. Total Office Manager will not recalculate the Sales Tax for you, if necessary you would need to edit the invoice and update the Sales Tax information.
Setup Sales Tax Item – Calculate based on Direct Cost 7%
12/1 – Enter Item Receipt for Serialized Item XXX for $10
12/15 – Invoice Customer for Serialized Item XXX Cost shows $10 – Sales Tax = $0.70
12/31 – Run Sales Tax Liability Report for December – Taxable Amount = $10 – Tax Collected and Amount due shows $0.70
12/31 – Pay Sales Tax Amount Due of $0.70
1/1 – Enter Bill for Received Items for Serialized Item XXX – Change Item Cost to $50
At this point, if you review your Job Costing Overview report it will correctly show the $50 cost of the item.
If anyone in the company opens the Invoice and clicks “Save & Close” or “Save & New” the Sales tax will be recalculated based on the new Cost of the item that was entered on the Bill.
Solution to ensure tax is always calculated on the actual purchase price of the Serialized Item is to make sure that the Vendor Bill, Check or Credit Card charge has the total price for the item prior to creating an Invoice/Sale for the Customer.
Inventory Items in Total Office Manager use the Average Costing Method (see Average Cost). Total Office Manager does not allow you to sell Inventory Items unless you have some in stock or unless you have set the preference and agreed that this may have adverse effects on your accounting information.
When you purchase an Inventory Item it will update this average cost. When you sale/invoice an Inventory Item it will populate the Average Cost at the time the Invoice is entered into the Cost field on the Invoice/Sale and calculate the Direct Cost or Gross Profit Tax based on that number.
Non-Inventory, Other Charge and Service Items
These items do not have a Direct Cost nor a Estimated Cost so no Direct Cost or Gross Profit tax is calculated on these items in the Invoice.
Non-Inventory, Other Charge and Service Items when the “this item is bought and sold …” check box is checked
These items function in several different ways:
- If you select the item from the drop down list in the Invoice/Sale the Cost Ea. field will be populated from the Estimated Cost setup on the Item at the time of the Invoice/Sale. Your Direct Cost and Gross Profit Sales Tax will be calculated on that field.
- If you enter one of these type Items on an Item Receipt, Bill, Check or Credit Card Charge and select the Customer and mark it Reimbursable, it will be available in the Reimbursable window in the Invoice/Sale Menu options. When you create the Invoice/Sale if you go to Menu | Reimbursables and select the item to be placed on the Invoice the Cost Ea. field will be populated from the Amount field on the Item Receipt, Bill, Check or Credit Card Charge at the time the Invoice/Sale is created. Any Gross Profit or Direct Cost Sales Tax will be calculated off these amounts.
- In Total Office Manager if you set the preference “Allow Direct Cost Edit” located at Edit | Preferences | Sales/Invoices/Estimates | Company Preferences you will be able to edit the Cost Ea. field on any of the Item types above so that your Direct Cost or Gross Profit sales tax is calculated by the amount that you Manually enter.