Taxes: Creating Tax on top of other Taxes - how can I do this?
Posted by Jeff Tweddale on 17 Nov 2010 02:30 PM

There are times when one wishes to have a 'Tip' or 'Service Charge' applied to Items (as a percentage or a flat fee) and then have tax applied to both the Item and the

In these cases, one must be creative and use the flexible Tax system smartly. Let's use an example to show it is done:

Let's say you have a goal that desires a 'Tip' of 12% to be applied to each Room Rent posting (or all Items sold at your property) and then a 'Room Tax' of 13% on the Rent and the Tip, thus taxing the Room and the Tip.

We would set the 'Room Tax' at as 14.56%

We would create a new Tax at: called 'Tip' as 12%.

When RENT (or any Item w/both of these are applied to), the 'Tip' goes onto the Folio as 12% and the 'Room Tax' at 14.56% is a mathematical formula for multplying 13% ('true 'Room Tax' ) on top of 12% (tips), resulting in proper 'Room Tax' postings of 13% tax on top of the 12% Tip every time.

The only problem with this is if you wished to use an Item (such as 'cancellation fee') that needs 'Room Tax' directly of 13% and does not use the 12% 'tip'. What would you do? You would create a 4th tax called 'Room Tax -secondary' (or whatever) and set it as 13%. This would be applied to the Items you wish to apply the 13% tax to (such as 'cancellation fee') and 'Room Tax' and Tip tax would NOT be applied to that Item.

Under this scenario, the Transaction Report would have the 'Room Tax' report divided into 2 rows:

1) the 14.56% 'Room Tax' and
2) the 13% 'Room Tax - secondary'

Thus, the property would use the Transaction Report to report the combined 'Room Tax' from their operations into a single tax payment to the tax authority.

This is an easy way to achieve 'Tax on Tax' by using our flexible tax system.

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