Tax Rules can be used to create multi-tier tax schemas. For example, in Australia those who make wine, import wine into Australia or sell it by wholesale will generally have to account for wine equalisation tax (WET).
- Read the Getting Started Guide
- Set up Tax Rules
- Create a liability account to record WET transactions
NOTE: If you are using Xero as your accounting system, you should use a different method to track WET: Accounting for WET (Xero and DEAR).
Jane has a winemaking business. She sells wine to a bottle shop for $120 a dozen before tax. How does Jane need to set up her tax rules to calculate WET correctly on her Invoices?
- Navigate to Settings → Reference Books → Financials → Taxation Rules.
- Click + to add a tax rule.
- Fill in the required fields for the tax rule as shown below. If you do not have a WET account setup, you can create one by navigating to Settings → Reference Books → Financials → Chart of Accounts.
- WET Account Settings - Type: Current Liability, System Account: None, doesn't accept payments.
- The GST will be a compound tax rate in this case, meaning it will be applied on the subtotal of the before tax amount.
- When creating a new sale invoice make sure you use the newly created WET tax rule.
Breakdown of tax calculation:
|1 dozen wine||$120.00|
|Plus WET @ 29%|
($120.00 × (29÷100))
|Plus GST @ 10%|
($154.80 × (10÷100))
|Total selling price||$170.28|
- The breakdown for multi-tax components can also be shown on the invoice (but not on the sale order interface). This can be done by editing the Document Template.