Taxes

Taxes (VAT, sales tax) are set up once with a name and a rate, then applied per item on sales and purchase lines. The tax collected and paid posts to the Tax Payable account.

Go to Settings › Tax.

Adding a tax

1. Click Add Tax.
2. Enter the Name (for example VAT 15%, unique) and the Rate (a percentage between 0 and 100).
3. Set its Status (active or not) and Save.

A tax used on transactions or documents can't be deleted; make it inactive instead.

How taxes are applied

• Each item has a Tax. New items get the company's default tax from Settings › Organization › Tax.
• On sales and purchase lines, the tax comes from the item and can be changed per line. Every line needs an active tax; use a 0% tax for tax-free items.
• The tax columns appear when Tax On Sales (sales) and Vat On Purchase (purchases) are on in Preferences.

Not charging tax

Keep the default tax at 0% and inactive (the setup wizard suggests this), and leave Tax On Sales and Vat On Purchase off.

Posting

Tax on sales is credited to Tax Payable; tax on purchases is debited to it. The account's balance is what you owe (or can reclaim). See What each document posts.