THE ESSENTIALS

These are some basic terms used throughout the software when referring to Taxes.

Tax Regions

A Tax Region groups together a number of countries of agreement with the same taxation obligations, such as the EU, the US, and the UK. However, a tax region allows you to differentiate the taxation policies for the countries of the region. For example, you can set up Taxes manually for one region and use an online taxation service for another.

Tax Inclusive / Tax Exclusive

A business can choose whether product prices include taxes or not. Tax-inclusive means that a business's product prices already include taxes. On the other hand, Tax-exclusive indicates that the product prices do not include taxes and will be calculated and added when the invoice transaction is created.

Tax Code

CRM.COM provides three different types of tax codes to choose from when defining Taxes:

• VAT - Multiple Value Added Tax models can be defined

• Sales Tax - Multiple Sales Tax models can be configured

• Tax Exempt - A single tax-exempt model can be configured per country to define the conditions whereby a product, product family or location are tax tax-exempt

'As of' Date

The date whereby the Tax model becomes effective.

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Tax Rate

The Tax rate percentage.

Supply Method

The supply method for which the tax model applies. Options include:

• Pick-up

• Delivery

• Direct Sale

Country

This is the country to which the Tax model applies. The country is determined by the contact's Country of Agreement. Therefore, a contact will be charged based on the tax model of the country where they reside.

Managing Taxes

Relevant Taxes are applied whenever a financial transaction (i.e. an invoice) is issued on behalf of a contact for purchasing services or physical goods. They are applied based on the date on which the transaction was posted. Taxes are also incorporated into credit notes when they are issued against invoices.

The Tax amount can either be included in the product price (Tax inclusive) or calculated as a percentage in addition to the product price (Tax exclusive) to get the final price that will be paid or credited.

One or more taxes can be applied per invoice line based on the tax definitions and conditions supplied.

Viewing Product Taxes

If a product SKU or a product family has been explicitly included as a condition for a Tax model, then you will be able to view the applicable Taxes from the product screen - navigate to Products > select a product > Taxes - any valid taxes based on the product SKU or product family will be visible here.

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Tax code definition with product SKUs

Overriding the Default Tax Model

Even though a business may have configured its default Tax model to be Tax Inclusive (or vice versa), it's still possible to override this setting when defining the prices for individual products. For example, a business selling services could set its default Tax model to Tax Inclusive, but its physical goods can be defined as Tax exclusive. This setting is available from the product pricing screen (Commerce > Products > Select a Product > Pricing > Add Price/Edit).

Tax Exempt Contacts

Tax Exempt defines a contact state whereby no taxes are applied whenever such a contact is being invoiced for a purchase. A Contact can be manually marked as Tax Exempt from the Contact screen.

Applied Taxes

• For non-tax-exempt contacts, the system first searches for a Tax code based on the contact's account Billing address. If there is no billing address, then the contact's Country of agreement is used to get the tax model (i.e. apply the taxes of the country that the contact signed up to)

• If a Tax code is not identified for a product, then the country's default tax rate is used instead.

• A product may be eligible for more than one Tax rate model; e.g. a VAT rate and a Sales Tax rate could apply (per invoice line). However, only a single tax rate per model is applied for each product, e.g. if there are 2 VAT rates, then only one will be applied.

Tax Settings

To view or create a Tax model, navigate to the Financials Settings screen - select Settings > Financials > Financials > Taxes.

Tax Regions

The first thing a system user must do is create a tax region and add one or more countries to the region.

• Configuration mode - Only manual configuration is available currently.

• Countries - The countries that can be added are those configured in Countries (Settings > Platform > Generic > Countries).

On the Tax Regions summary screen, you can define your business's System default for tax inclusion which is to be applied across the software.

• Tax Inclusive - Product prices include all taxes so that no additional charges will be added to the product price

• Tax Exclusive - Product prices do not include taxes; one or more taxes may be added to the product price to get the final price

Creating a Tax Code

When the tax region is created, select Manage Taxes of the respective country to create the tax rates.

Select the Create Tax option.

Name

Provide a unique name to identify the Tax model.

Description

Provide an optional tax description.

Rate

Provide the Tax rate percentage, that will be applicable as of today; this is not required for Tax Exempt models.

As of date

Set the date on which the rate will be applied. When setting up a new Tax Rate, this date remains empty by default (i.e. it's always valid). You can later on change it and even set the date in the future in case of a tax's scheduled increase/decrease. It is important to note that when taxes are applied, CRM.COM always applies the tax rate that is valid on the date the financial transaction is posted.

Tax Code

Select one of the valid tax codes :

• VAT & Sales Tax - Multiple Tax models can be defined for both these Tax codes. Both Taxes can be applied to a single product, but only one of each type.

• Tax Exempt - A single tax-exempt model can be configured per country with conditions to exclude Tax from specific product SKUs, product families or locations. The Rate for this code is automatically set to zero since no taxes are charged.

Supply Method

If the Tax model applies to one or more specific supply methods (for the purpose of ordering), then select those to which it applies.

Country

Select the Country for which the Tax model applies; a Country can have multiple Tax Models for VAT and Sales Taxes but only one of Tax Exempt types.

Set as Default

Specify if the Tax model is the default one. Default Tax rates are applied when the invoicing process cannot identify a Tax model to apply, usually because a contact's billing address is missing and the contact's country of agreement is not set.

Only one Tax model per country can be defined as the default Tax code. A tax code is set as the default tax code upon creation if it's the first tax code being created for a country.

Product Conditions

A Tax model can be configured to apply only to specific product SKUs. Select Add Product and locate the relevant products, either using their name or SKU or by selecting from the drop-down list. If no products are specified, the tax model applies to all products.

The business's product catalogue should already be configured in order to apply product conditions.

Product Family Conditions

A Tax model can be applied only to specific product families. Select Add Family and specify the families either by using their names or selecting them from the available drop-down list.

If using the family condition, ensure that the products in the system have the correct family defined so that they can be detected by the condition results.

If no product families are specified, then the Tax model applies to all product families.

Location Conditions

Tax models can be defined to be applicable to one or more specific (contact residing) locations. Select Add Location to define one or more location conditions. If none are defined, then the Tax model applies to all locations.

The Tax model will be applied to contacts with a billing address matching one of the locations specified.

Deleting a Tax Model

A Tax model can only be deleted if it hasn't been used for invoicing yet.

Reference Material

You may also find it useful to refer to the following manuals for further reading about to Taxes.

Contacts

Contacts

Product Catalogue

Product Catalogue

Pricing

Pricing

Financials

Financials

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