Currently, taxes are handled as flat percentages within Stock&Buy. While this is handy for some of our customers, it has considerable limitations for others. Especially those using tax rates which are composed of multiple elements. This becomes even more important for those who need to get their taxes right in their accounting systems such as Xero.
Today, we are happy to announce our brand new tax handling system. The new implementation empowers you to add your own tax rates in Stock&Buy to charge or record sales tax on your sales and purchases.
Each tax rate can have multiple components and you can have as many rates as you need. For example, sales tax and state tax. Your previous sales tax returns might be a good source of information for the taxes to set up in Stock&Buy for proper tax handling. You can still enter invoices, bills and transactions in Stock&Buy if you haven’t set them up, but it might be easier to set them up first (default tax rates will be applied otherwise). Talk to your accountant or bookkeeper if you need help.
View and enter your own tax rates
When signing up with Stock&Buy, you automatically get three default tax rates: tax excempt (0%), sales tax (12%) and purchase tax (15%). You can edit these default taxes and / or add your own custom rates from the Taxes view accessible from the left hand side navigation menu.
How and where are tax rates used?
Each line item you enter in Stock&Buy (whether these are items on sales invoices you are sending to customers, bills you are receiving from suppliers) has a tax element.
All tax recorded in Stock&Buy is reported in the Sales details and in each order details page so you can see how much tax you’ve charged or paid at anytime. As a reminder, Stock&Buy will create default tax rates when you first sign up. If you don’t want to use these default tax rates, you can create your own and apply them as the default for sales and purchases – this can be done in the Taxes view.
Each tax rate or your combination of tax rates and how you use them in Stock&Buy will be as simple or complex as you make them to correctly record sales tax for your business in the country you’re in. A tax rate can have one or more components. Click the New Tax Rate button to create a new tax rate and complete the fields for name, components, and rate.
Add / Edit Tax Rate
The Add / Edit tax rate dialog exposes various fields which allow you to define and identify your tax rates.
The tax rate display name
Identifies the tax rate used in the Taxes view or on transactions you’re entering into Stock&Buy. It’s only shown within Stock&Buy, so your customer only sees the final tax % on the PDF invoice. If you have several tax rates using the same percentages but you’d like to distinguish between them, give them different display names. Depending on how many tax rates you’re going to have (for example, several for each different type of sale you make including sales to different states, regions, countries or type of organisation) you might like to think of the naming convention you’re going to use in Stock&Buy. You can use both letters and numbers in the name if you want to use some sort of code to name your rates. When you are entering a transaction, you’ll only be able to see the name of the rate, not how the rate is made up.
Every tax rate has at least one component. This is the actual percentage applied to an item when you use the rate. Typically it’s a rate set by your tax authority. The overall tax rate can be made up of many components. It’s the overall percentage rate that’s used to calculate the tax and displayed on the invoice or purchase PDF. Enter the name of the tax component that makes up the tax rate and the percentage rate. The component name might be different to the overall tax rate name that you refer to on transactions as it is likely to be the specific name for the type of tax you’re including in the overall rate. Stock&Buy calculates tax for rates that have more than one component by totaling up all the components and applying that overall rate to the line amount.
The overall rate is automatically appended as a percentage to the tax rate name after you’ve saved it for your quick reference. For example, a rate that has components 5% and 7% will be applied to the line item as 12%. If you have more than one component, any one of the components can be a compound rate. The compound rate will be calculated on the transaction or invoice subtotal after other tax components in that tax rate have been applied to the line item. Tax rates with a compounding component will have an overall effective tax rate that will be used to calculate the tax on a line item – the effective rate already has the compounding component calculated on the other components that make up the overall rate.
We hope you will like these new additions to Stock&Buy and as always, please don’t hesitate to drop us a line if you have any comments, feature suggestions or just to say hi 🙂