What are compound taxes? How do I convert a tax into a compound tax?

A Compound tax is calculated on top of the primary tax.

Letโ€™s take an example where the price of an item is $100. After applying 10% primary tax, the value of the item sums up to $110. Now, adding a 10% compound tax will add 10% of $110 to the resultant value. Thus, the end value after applying the compound tax would be $121.

To convert a tax into a compound tax:

  • Go to the Taxes tab and click on the + New Tax button or click on an existing tax entry.
  • A new pop-up window will appear on the screen.
  • If you wish to convert the tax into a compound tax, check on the โ€˜Yes, this tax is a compound tax’ option.
  • Click Save for the changes to take effect.
  • Now your tax of choice will be converted into a compound tax.