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.

Setting Up Sales Tax

You can enable sales tax in Zoho Billing by:

Create a new tax

Before using sales tax in your invoices and quotes, 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.

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%.

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.

Default Tax

The Default Tax will be used in transactions when tax preference (Taxable/Tax Exempt) is not set for the involved customers. The first tax you create will be marked as the Default Tax initially. However, you can mark a different sales tax as default as well.

Default Tax can be useful for the following scenarios.

Default Tax is not automatically associated with a customer. It is only used when tax preference (Taxable/Tax Exempt) is not set for the involved customers. You can set the Tax Preference of a customer at anytime.

To mark a different tax as default, navigate to Settings > Taxes & Compliance > Taxes. Now choose the tax to be marked as default and click “mark as default”.

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.

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.

Sales Tax in Items

You can also choose tax preferences for items.

Making an item nontaxable in invoices

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

Sales Tax in Invoices

After associating specified sales tax for contacts, the next step is applying sales taxes to 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.

The same steps can be followed while applying sales tax to recurring invoices as well.

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 quotes and credit notes as well.

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