Sales Tax Features

Sales Tax Features

Sales Tax

Keeping track of Sales Tax can be a difficult chore. CustomBooks™ offers two ways to lighten the load and help you account for Sales Tax collection and payment.

Our built in Sales Tax functionality is comprised of Sales Tax Agencies, Sales Tax Rates and Sales Tax Payments.

We’ve also partnered with Avalara and integrated their AvaTax product directly into CustomBooks™ – with this choice, one click will calculate the appropriate sales tax based on the products, shipping location and tax status of the sales invoice or order.

Using the Built-in Sales Tax Features

The Sales Tax functionality in CustomBooks™ allows you to enter Sales Tax Rates that are made up of sales tax components. By grouping components together, a rate is created and assigned to a customer.

Sales Tax may be configured to be calculated at time of sale. Because of the complexity of sales taxes, the Sales Tax functionality in CustomBooks™ was designed with complete flexibility. Configuring Sales Tax is comprised of three parts:

  1. Adding Sales Tax Agencies
  2. Adding Sales Tax Rates
  3. Enabling Sales Tax in Settings, Customers / Vendors and Items

In addition, sales tax may also be enabled/disabled on the individual line items when creating a Sales Order or a Purchase Order.

Warning:   If you choose the built-in Sales Tax Features, you must be aware of the laws affecting jurisdictions in which you buy and sell.   It is your responsibility to know the correct rate and failure to do so could lead to fines and penalties from your tax authority.   Please consult with a professional who fully understands sales tax before using these features.

To Enable Sales Tax:


  1. Navigate to  Settings → Sales Tax.
  2. Click the Sales Tax tab.
  3. Check the Yes checkbox next to Do you Charge Sales Tax?
  4. Enter a Default Sales Tax to be added.  Note:  You may need to add a new rate.  See Section below for instructions.
  5. To set all new customers to be marked as taxable by default, check the checkbox with the label Mark all new customers as taxable.
  6. To set all new items to be taxable, check the checkbox next to Mark all new items as taxable.
  7. To set a default address to be used when calculating sales tax, pick Shipping / Destination, Billing or Origin from the dropdown (see note below).  
  8. Click Save and Close.


Sales Tax rules are complicated.  In some jurisdictions,  the sales tax is calculated based on the billing address of the customer.  In others, the shipping address or destination of the product is used.   Yet others dictate calculation based on the Origin or Ship From address of the company selling the product. CustomBooksis flexible enough to handle all three scenarios using the  Sales Tax Address.   
Warning:  CustomBooks™ does not choose sales tax rates for you.  You should be aware of all sales tax laws rules and rates for your jurisdiction and those jurisdictions of your customers.  Failure to choose the right rate can lead to fines from the tax authority.

Sales Tax Rate

A Sales Tax Rate is made up of one or more components. A component is a single rate with a Sales Tax Agency in which the tax is owed. A Sales Tax Rate that is made up of only one component is called a Single Tax Rate, and one with more than one component is called a Combined Tax Rate.

Adding a Single Sales Tax Rate:

  1. Click Sales Tax → Sales Tax Rate.
  2. Select Single Tax Rate radio button.
  3. Enter the Name of the tax and choose the Sales Tax Agency from the drop-down list.
  4. Click Save and Close.

Adding a Combined Sales Tax Rate:

  1. Click Sales Tax → Sales Tax Rate.
  2. Select Combined Tax Rate radio button.
  3. Enter the Name of the tax.
  4. For each component of the Sales Tax Rate, click the plus sign to add a new component and enter the sales tax component name and the sales tax component rate.
  5. Click Save and Close.

Creating a Tax Agency


  1. Navigate to Sales Tax → Sales Tax Agencies
  2. Click Create and enter a name for the agency.
  3. Click Save to save or Save and Close to finish.

Note:  Agencies names must be unique within an CustomBooks™ account.


Adding a Sales Tax Rate:

  1. Navigate to Sales Tax  Sales Tax Rates.
  2. Click Create.
  3. Choose Single Tax Rate or Combined Tax Rate for the new tax. A combined tax rate will let you add two or more rates together to apply on an order.
  4. Enter a Name for the Tax Rate.
  5. If you are entering a combined tax rate, skip to Step 8.
  6. Choose a Tax Agency from the drop-down list.
  7. If you are entering a single tax rate, skip to step 13.
  8. Click the + sign above the table.
  9. Enter a Name for the first tax component.
  10. Choose a Tax Agency from the drop-down list.
  11. Enter the Rate for this component.
  12. Repeat Steps 8-10 until all components of the combined sales tax have been entered.
  13. Click Save to save or Save and Close to finish the Sales Tax Rate.

Enabling Sales Tax on an Item

To enable Sales Tax for an item, you may either :

Navigate to Inventory → Items and choose the Item from the list for which you would like to enable tax. Check the Taxable checkbox; or Check the Taxable checkbox on the Sales Invoice Line Item.

The former will make the item taxable by default on all new sales transactions. . The latter will affect the item only on the invoice.


Enabling Sales Tax Calculation for a Customer

  • Navigate to Quick Menu → Customers / Vendors and choose the Customer from the list for which you would like to enable tax.
  • Double-click the customer to open and check the Customer is Taxable checkbox.
  • Click the Sales Tax tab and enter the Sales Tax Rate to apply for this customer.
  • If applicable, enter the Tax Resale.
  • On all addresses for the customer, open the address card and select the sales tax rate for that location.

Adding Sales Tax Rates on Warehouse Locations

Each of your locations must have a sales tax rate chosen on the location card (Inventory / Locations).   This rate will be used when Origin is chosen  on the Sales Tax Address field on the Sales Tax tab of the sales transaction.

Applying Sales Tax on a Sales Invoice

On a Sales Order or a Sales Invoice, tax will automatically be calculated if:

      a) The customer has been marked as taxable and
      b) the items have been marked as taxable.
      c) the address indicated on the Sales Tax tab has a rate associated with it.

If a and b  are not true, clicking the taxable checkbox on the line item will cause the default tax rate to be applied. The tax breakdown may be viewed by clicking the Sales Tax tab. In addition, you may choose to tax discounts given on a Sales Order or a Sales Invoice.  If c is not true, you will receive an error and will need to add the rate to the location.


The Sales Tax Address (the address in which to use when calculating sales tax must be chosen and the address chosen must have a rate.

Applying Sales Tax on Shipping

To apply Sales Tax on Shipping, Add Shipping as an Item in the item list. Add Shipping as a line item on the document and mark the line as taxable.

 

Recording Payment of Sales Taxes

  1. Navigate to Sales Tax → Sales Tax Payment.
  2. Click Create.
  3. Choose the Sales Tax Agency to which the payment is being made.
  4. Choose the Bank Account.
  5. Choose the Period Ending Date.
  6. Choose Accrual or Cash-Based based on your accounting practices.
  7. Enter the Amount of payment.
  8. If you need to enter an adjustment (an increase or decrease to the amount the system has recorded to to fines, etc, check the Adjustment checkbox. If not, skip the next step.
  9. Enter the Adjustment Amount, the Account and the Reason.
  10. Click Save to save or Save and Close to finish.

Sales Tax Tips & Tricks

  • If you don’t see the Sales Tax Menu item, enable it in Settings.
  • View the Sales Taxes Owed Report to see a breakdown by a user-defined time-frame grouped by agency.
  • Keep track of what has been paid by using the Sales Tax Payment Form.
  • If the sales tax agency is not listed in the drop-down list, click the plus sign to add a new Sales Tax Agency.
  • To edit a sales tax component, click the edit icon in the components list. Make the desired changes and Click Save and Close.
  • To copy a sales tax component, click the copy icon in the components list. After makes the desired adjustments, click the Save and Close button.
  • Sales Tax may be added on orders or invoices even when the item or the customer has not been marked as taxable. Check the taxable checkbox on the line item to add tax. The rate that is listed on the sales tax tab on the Sales Quote, Sales Order, Sales Invoice, Cash Sale or Credit Memo will be used in the calculation of the sales tax on the order.
Summary of Setup
  1. Create Sales Tax Agencies.
  2. Create Sales Tax Rates.
  3. Add Sales Tax Rates to customers/addresses.
  4. Enable taxation on Customers
  5. Add Sales Tax Rates to Locations
  6. Enable taxation on Products
See Also : Avalara AvaTax, Sales Tax Reports
Last updated on 11/4/2020 - JML

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