Sales taxes and VAT
How are sales taxes and VAT calculated?
Please see this post explaining how both types of taxes are calculated, and how to configure the app to use either sales taxes or VAT.
Note that Best Farrier calculates taxes on a line item basis, which means that each invoice line is evaluated, its tax is calculated (if applicable) and stored, and the total tax amount is the sum of each individual line item’s tax.
What if I need some items in an invoice to be tax-exempt?
If you use sales taxes as your tax method, we suggest you create two separate invoices: one for all the items that are charged sales taxes, and one for the tax-exempt ones (by removing the sales taxes when creating the second invoice).
If you use VAT, then the tax-exempt services or products you provide may be marked as so in the Services and Products screen.
The sales taxes and VAT list
This page lists all the sales taxes and VAT definitions.
The top bar allows you to:
- Go back to the Settings page
- Filter the list and show only “active“ or “inactive” taxes
- Add a new tax ()
Each tax definition shows a description, whether it’s a sales tax or VAT (including VAT type), the tax rate and whether it applies to services, products or both. The letters on the icon to the left are simply the first 2 letters of the tax description, useful to quickly differentiate different tax groups like taxes for different states.
Taxes marked with a are default taxes, and are automatically applied to any new invoice (you can still change this while creating the invoice). You can have multiple default taxes, and they’re all added to new invoices during creation.
Note that during invoice creation/editing, you can only use tax definitions for the tax method (either sales tax or VAT) the app is using. Taxes for the other method are not shown as options or included even if they’re marked as default.
Adding or editing taxes
You can add a new tax definition by tapping on the tax list top bar. To edit an existing tax, tap on it.
If you check the “This is a VAT” box, the tax will be considered a VAT, and you will see an additional option to chose its VAT rate type:
You can refer to this post for more information on how VAT rate types are used during tax calculations.
When entering or editing a tax, you can specify if the tax will apply to services, products or both, using the appropriate checkboxes.
If you check the default tax box, this tax will be added automatically to any new invoice you create, as long as it matches the app’s current tax method (sales tax or VAT).
The active checkbox indicate whether this is an active tax or not. See “deleting a tax“, below.
Important notice when editing taxes
Versions 1.0.2 and newer
You can only partially edit information on tax definitions if they have already been applied to any invoices. This is done to prevent possible inconsistencies with older invoices in the tax reports. You’re still allowed to change the tax description, it it is a default tax or not, and mark it as active or inactive.
Versions prior to 1.0.2
When editing a tax definition, you will see a warning at the top of the screen, but the app will still let you modify any information on the tax definition. Be sure you know what you’re doing before changing the rate, or whether the tax applies to services and/or products!
If you have a tax definition that needs updating, instead of modifying the existing tax, do the following:
- Change the description of the incorrect/outdated tax
- Mark the incorrect/outdated tax as “inactive“
- Create a new tax with the updated info
- Start using the new tax from now on
This way, any old invoices that used the original tax will still be reported correctly in the tax reports, with the correct amounts.
Deleting a tax
To delete a tax definition, tap on the entry on the tax list to edit it, then tap on the top bar.
If the icon is not present, that means the tax was already included in an invoice. It cannot be deleted anymore, but you can instead mark it as “inactive” to prevent it from being used in new invoices from now on.
To mark a tax as “inactive”, just edit it and uncheck its “active” box.