Tax Settings
Tax Settings in Zoho Spend enables you to automate and streamline the process of applying tax rates in transactions. Once configured, you won’t need to associate tax rates to transactions manually, or create new tax rates for different provinces in Canada.
Scenario:
John operates a hardware business in Manitoba, Canada. He purchases supplies and inventory from vendors located across different provinces in Canada. Previously, each time he recorded a purchase, he had to manually select the correct tax rate based on the vendor’s provincial tax rules—a process that was time-consuming and prone to error.
After enabling Tax Automation in his organization, the appropriate tax rates are now automatically applied to his purchase transactions based on the vendor’s location. This automation eliminates the need for John to manually choose tax rates for each purchase, ensuring accuracy and saving him valuable time.
You can set up Tax Settings by configuring the taxes based on the provinces where your business is registered. Once you’ve configured the taxes, Zoho Spend will automatically create the appropriate tax rates and tax rules in your organization.
Note:
You can still create new tax rates or tax agencies as required by your business.
In Zoho Spend you can configure the following taxes in your organization based on the provinces in which your business is registered:
- Goods and Services Tax (GST) / Harmonized Sales Tax (HST)
- British Columbia Provincial Sales Tax (BC PST)
- Quebec Sales Tax (QST)
- Manitoba Retail Sales Tax (MB RST)
- Saskatchewan Provincial Sales Tax (SK PST)
Here’s how you can configure the taxes:
- Go to Settings on the left sidebar.
(OR)
Click Settings in the top right corner of the page. - Click Taxes under Taxes & Compliance.
- In the Taxes pane, click Tax Settings.
- Click Configure next to the taxes that are applicable to your business.
Note:
Ensure that you configure the taxes only for the provinces in which your business is registered and is obligated to collect and pay tax.
- Enter the necessary details in the pop-up that appears.
- Click Save. Based on the taxes, the tax rules in your organization will be configured.
Tax Rules
Tax rules in Zoho Spend are a specified set of criteria that determine what tax rates should be applied to transactions based on the provincial and federal tax rates set by the Government of Canada.
Note:
Tax Rules are applicable only for Purchase Transactions.
How do Tax Rules work?
In Zoho Spend, tax rules will be created based on the configuration of the Tax Settings in your organization. Initially, the default tax rules will be configured taking into account the GST/HST tax rate that is applicable for all provinces in Canada. However, once you configure the taxes applicable for your business, the default tax rule will be automatically re-configured taking into account the location of the newly-configured taxes. The tax rates in your transactions will then be auto-filled based on the default tax rules.
Scenario:
Brandon runs an e-commerce business in Canada and primarily purchases goods and services within Ontario. As his operations grow, he begins sourcing items from vendors in Manitoba as well. To ensure his purchase records remain compliant, he configures the relevant Manitoba tax setting (MB RST) in Zoho Spend.
Now, whenever Brandon records a purchase from a Manitoba-based vendor, Zoho Spend automatically applies the correct tax rate of 12% (5% GST + 7% MB RST) to the transaction. This automation saves him time and ensures his business stays compliant with the varying tax rules across different provinces.
Tax Rates in Canada
This table contains an overview of the different tax rates i.e., GST, HST and provincial tax rates that are applicable in different provinces in Canada.
| Province | Tax | Total Tax Rate | Provincial Sales Tax Rate | Federal Tax Rate |
|---|---|---|---|---|
| Alberta | GST | 5% | 0% | 5% |
| British Columbia | GST + PST | 12% | 7% | 5% |
| Manitoba | GST + PST | 12% | 7% | 5% |
| New Brunswick | HST | 15% | 10% | 5% |
| Newfoundland & Labrador | HST | 15% | 10% | 5% |
| Northwest Territories | GST | 5% | 0% | 5% |
| Nova Scotia | HST | 15% | 10% | 5% |
| Ontario | HST | 13% | 8% | 5% |
| Prince Edward Island | HST | 15% | 10% | 5% |
| Quebec | GST + QST | 14.975% | 9.975% | 5% |
| Saskatchewan | GST + PST | 11% | 6% | 5% |
| Yukon Territory | GST | 5% | 0% | 5% |
| All States | Zero Rate | 0% | NA | NA |
Note:
Zero-rate tax is applicable in all provinces for certain goods and services such as services associated with exports, financial services, food and agriculture, and medical goods and services.
Create Tax Rules
Once you’ve set up Tax Settings in your organization, the tax rates in transactions will be pre-filled based on the default tax rules. However, there might be instances when a particular vendor or item might need unique tax handling. For such cases, you can create tax rules and associate them as required.
Note:
If you associate a tax rule to your vendor, the tax rates in their transactions will be applied based on only the associated rule; irrespective of their shipping or billing address or your organization’s location.
Create Tax Rules for Vendors
Tax rules that are assigned to specific vendors are categorized as Contact-Based Tax Rules. Based on the shipping and when you create a transaction for a vendor who has a tax rule assigned, the tax rate will be fetched automatically and applied.
Scenario:
Brandon Taylor owns a computer store and regularly purchases computer parts and peripherals from a vendor who provides these items to him at a zero-tax rate because of his eligibility for a tax-exempt program. Instead of manually selecting the zero-tax option every time he records a purchase from this vendor, Brandon creates a tax rule in Zoho Spend that is specific to the vendor. As a result, Zoho Spend automatically applies the zero-tax rate to all items in any purchase transaction created for that vendor.
Here’s how you can create a tax rule for a vendor:
- Go to Settings on the left sidebar.
(OR)
Click Settings in the top right corner of the page. - Click Taxes under Taxes & Compliance.
- In the Taxes pane, click Tax Rules.
- Click the + New Tax Rule button in the top-right corner.
- Enter the necessary details on the tax rule creation page.
| Field | Description |
|---|---|
| Tax Rule Name | Enter a name for the tax rule. |
| Association Type | Select Contact based as the association type |
| Transaction Type | Select the transaction type as Purchases. |
| Tax Rate (%) | Select the tax rate that should be associated with the tax rule. |
Create Tax Rules for Items
Tax rules that are assigned to specific items are categorized as Item based Tax Rules. Using this, you can set the tax rates for different states in a country for purchase transactions.
Here’s how you can create a tax rule for an item:
- Go to Settings on the left sidebar.
(OR)
Click Settings in the top right corner of the page. - Click Taxes under Taxes & Compliance.
- In the Taxes pane, click Tax Rules.
- Click the + New Tax Rule button in the top-right corner.
- On the tax rule creation page, enter the required details.
| Field | Description |
|---|---|
| Tax Rule Name | Enter a name for the tax rule. |
| Association Type | Select Item based on the association type |
| Transaction Type | Select the transaction type as Purchases. |
| Tax Rate (%) | Select the tax rate that should be associated with the tax rule. |
For tax rules in purchase transactions, you can assign different taxes based on the country or different states in a country.
| Field | Description |
|---|---|
| Country | Select the option you want (All countries or Canada) using the drop-down menu. |
| State | Select the State/Province using the drop-down menu. You can add multiple states by clicking + Add New State. |
| Tax Name | Select a tax rate for the state(s) you have added. |
- Click + Add New Country if you wish to add another country other than the previously selected option.
Edit Tax Rules
Note:
System-defined tax rules cannot be edited.
Here’s how you can edit an existing tax rule:
- Go to Settings on the left sidebar.
(OR)
Click Settings in the top right corner of the page. - Click Taxes under Taxes & Compliance.
- In the Taxes pane, click Tax Rules under Advanced Tax Automation.
- Hover over the tax rule and click Edit.
- Make the necessary changes and click Save.
Deleting Tax Rules
Note:
System-defined tax rules cannot be deleted.
Here’s how you can delete a tax rule:
- Go to Settings on the left sidebar.
(OR)
Click Settings in the top right corner of the page. - Click Taxes under Taxes & Compliance.
- In the Taxes pane, click Tax Rules under Advanced Tax Automation.
- Hover over the tax rule and click the Delete icon.
- Click OK to confirm.
Associate Tax Rules
Since you have tax settings enabled, the tax rules for your vendors or items will be applied based on the default tax rule in your organization. However, if a vendor or an item requires unique tax handling, then you can manually select a tax rule.
Associate Tax Rules to Vendors
You can associate a special tax rule to vendors while creating or editing vendors. Here’s how:
- Go to Vendors module on the left sidebar.
- Click + New in the top right corner.
- Navigate to the Other Details section.
- Click the Tax Rule dropdown, and select the required tax rule.
Note:
Only manually created tax rules will be displayed in the Tax Rule dropdown. If your vendor does not fall under these categories, you can leave this field empty. By default, the system purchase tax rule will be applied to the vendors.
Insight:
If you’d like to change the associated tax rule, you can edit vendors. Click the Tax Rule dropdown and select a different tax rule. This new tax rule will be applied to all future transactions of this vendor. Your existing transactions will remain unaffected.
Associate Tax Rules to Items
You can associate purchase tax rules to items. This is especially helpful when you purchase an item from a province but sell it in a different province.
Insight:
If a specific item requires unique tax handling, you can create a new tax rule for that particular item and associate it when creating the item or by editing the item’s details.
Here’s how you can associate tax rules to items:
- Go to Items module on the left sidebar.
- Click + New in the top right corner.
- Click the Purchase Tax Rule dropdown and select the appropriate rule for the item.
Note:
Only zero-rate and manually created tax rules will be displayed in the Purchase Tax Rule dropdown.