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Overview

The Sales Tax feature is exclusive to the USA. It cannot be enabled from the global version. You need to create a new organization and choose the US edition to make use of this feature. Below are a list of operations you can perform with sales tax.

Creating an organization

In Zoho Books, your business is termed an organization. Find out how you can create a new organization for your business.

Setting Up Sales Tax

If you are using Zoho Books for the first time, click Quick Setup in the Getting Started page. Choose Taxes. Enter tax details and save.

Quick setup

This section takes you through the process of enabling sales tax in Zoho Books. Here’s what you do.

Enable sales tax

Create a new tax

Before using sales tax in your invoices and estimates, you need to create a new tax. For example, the State sales tax rate of Utah is 4.7%.

Tax Authority can be created here in the New Tax form and by choosing New Tax Authority from the + New Tax drop down as well.

Create a new tax

Creating a new tax group

There might be occasions when multiple taxes need to be applied. You can club the individual taxes under a group. For example, Utah’s State sales tax rate is 4.7%, local sales tax rate is 1% and the County Option Sales Tax rate is .25%.

Create a new tax group

You’ll find that the tax group is a single entity with the percentage rate of individual sales taxes in the group summed up. This makes it easier to use tax groups in transactions.

Creating a new tax exemption

You can create new tax exemptions for customers and items. E.g. Child care and non-profit organizations are exempt from taxes.

Create a new tax exemption

Associating tax for a contact

Let’s say, your customer resides in Utah where a sales tax rate of 4.7% applies. Read below to find out how you can associate this rate to the customer.

Associating tax for a contact

Making a contact nontaxable

There might be occasions where your customer is a non-profit organization which is exempt from tax. You can make a particular customer non-taxable by following the below steps.

Making a contact nontaxable

Sales Tax in Items

You can also choose tax preferences for items.

Sales tax in items

Making an item nontaxable in invoices

You can make a particular item non-taxable in an invoice.

Making an Item Non-Taxable in Invoices

Sales Tax in Invoices

After associating specified sales tax for contacts, the next step is using sales taxes when creating invoices. If you choose a customer whom you have already associated tax with, then the corresponding tax will be applicable to all taxable items. However, if you choose to make the transaction non-taxable, you’ll be asked to enter a suitable exemption reason.

Sales tax in invoices

Making a particular invoice nontaxable

You can make a particular transaction nontaxable even if you have associated tax with the customer involved in the transaction. Tax will be disabled for that transaction and you’ll not be able to apply tax to individual items as well.

All sales tax related operations that can be performed with invoices are applicable to estimates, credit notes, sales orders and recurring invoices as well.

Tax Payments

Record tax payments

After you have paid the taxes you owe to the respective tax authorities, you can record those payments. Tax payments will be in accordance to the tax basis (accrual or cash) chosen in the organization profile. Before recording a payment, please make sure to configure a bank account. To record a tax payment, follow the below steps.

Record tax payments

Record payments with an adjustment

You can make an adjustment to the tax you owe in case of any rounding differences, penalties or discounts. To record a tax payment with an adjustment, please follow the below steps.

Apply tax adjustment

Now that an adjustment has been applied, the corresponding payment has to be recorded. Click Save in the Record Tax Payment form to record the payment with the adjustment.

Record tax payment with adjustments

You can find the list of tax adjustments applied in Tax Adjustments sub-tab.

Payment History

To view the tax payments you have made so far, follow the below steps.

Payment history

Reports

You can view detailed tax reports which displays clearly the taxable and non-taxable amount for a Tax Authority.

Summary report

Authority report

Customer report

Terminologies


Name Description
Tax Name It simply refers to the name you’d like to assign to a particular tax. For example, Austin can be the name assigned to the sales tax for the city of Austin.
Tax Authority It refers to the organization in charge of collecting taxes in a specified region. For example, the Travis County Tax Office is the tax authority for Austin, Texas.
Rate It refers to the tax rate for a particular region in percentage. For example, the tax rate in Austin, Texas is 8.25 (percentage).
Exemption Reason Users have to enter why a customer/transaction/item is exempt from sales tax. For example, Child Care and Non Profit Organizations are exempt from tax.
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