Sales Tax Automation - Operations

Configure Address Preferences

When Sales Tax Automation is enabled in Zoho Billing, it calculates sales tax using the customer’s billing address by default. You can change this to use the shipping address instead. Here’s how:

Go to Settings.
Select Taxes under Taxes & Compliance in the Organization Settings pane.
Navigate to Tax Automation Settings in the Taxes pane.
Click Change under Address Preference.
In the popup, choose Billing Address or Shipping Address, based on your preferences.
Click Save.

The address preference will now be applied automatically when calculating sales tax for all new transactions.

Configure Address Preferences for Recurring Transactions

Address verification for recurring transactions like subscription is optional by default. You can make it mandatory to ensure accurate tax calculations. When enabled, subscriptions can be created only after the customer’s address is verified. If the address needs to be updated, the user may need permission to edit the customer’s address.

Note: If the user does not have permission to edit the customer’s address, they must request access or ask an authorized user to update the address before creating the subscription.

To configure address preference for subscriptions:

Go to Settings.
Select Taxes under Taxes & Compliance in the Organization Settings pane.
Navigate to Tax Automation Settings in the Taxes pane.
Click Change under Address Verification Preference for Recurring Transactions.
In the popup that appears, select whether you want the preference to be Mandatory or Optional. * Click Save.

The selected address preference will now be applied automatically to subscriptions when calculating sales tax.

Configure Fallback Tax Rates

You can configure fallback tax rates so that tax is automatically applied to recurring transactions like subscriptions when tax automation is unavailable, to ensure taxes are applied for states where you have tax registrations. To configure:

Go to Settings.
Select Taxes under Taxes & Compliance in the Organization Settings pane.
Navigate to Tax Automation Settings in the Taxes pane.
Click Manage Fallback under Fallback Tax Rates.
Click + Configure State.
Select the State and Tax Name.
Click + Configure State to add another state’s fallback rate.
Click Save.
To remove a fallback rate, click the Remove icon next to it.

Once configured, the fallback tax rates will be automatically applied to subscriptions when tax automation is unavailable.

Configure Exemption Certificates

An exemption certificate is a document provided by a customer to show that they are not required to pay sales tax on certain purchases. Customers such as resellers, nonprofit organizations, or government agencies may qualify for this exemption under tax regulations. You can configure exemption certificates for customers so that eligible transactions can apply tax exemption based on jurisdiction rules.

To configure exemption certificates for a customer:

Go to Customers.
Select the customer for whom you want to configure the exemption certificate.
On the customer’s details page, click the More icon and select Exemption Certificates.
Click Add New in the top-right corner.
In the Create Exemption Certificate page, the Customer will be selected automatically.
Select the Exemption Category, State, Tax Authority, and Tax Exemption for the exemption certificate.
Enter the other necessary details.
Click Save.

Once the certificate is saved, it will be validated and applied to transactions based on the jurisdiction rules.

Note: Tax may still be applied if the item's Tax Category is not eligible for the exemption according to the jurisdiction rules.

Edit Tax Registration Details

To edit the tax registration details:

Go to Settings.
Select Taxes under Taxes & Compliance in the Organization Settings pane.
Click Tax Registration in the Taxes pane.
Hover over the required tax and click the dropdown icon next to it.
Select Edit and make the required changes.
Click Save.

The tax registration details will be updated.

Deregister Taxes

If you no longer conduct business in a state, or if you’re no longer required to collect taxes there, and have deregistered taxes there, you can mark it in Zoho Billing. This prevents sales tax from being automatically calculated for your transactions in that state and its local jurisdictions. Here’s how:

Go to Settings.
Select Taxes under Taxes & Compliance in the Organization Settings pane.
Click Tax Registration in the Taxes pane.
Hover over the required tax registration and click the dropdown icon next to it.
Select Edit.
Click Mark as Deregistered in the top right corner.
- If you’ve added multiple local taxes under a state, click Deregister All in the top right corner.
In the popup that appears, enter the Tax Deregistration Date, and click Deregister.

The tax deregistration will be recorded, and it will no longer be applied to your transactions.

Note:

When you deregister taxes at the state-level, the local taxes that you’ve added for that state will also be deregistered.

To mark a specific local tax as deregistered:

In the Edit Tax Registration Settings page, hover over the required local tax, and click Deregister.
In the popup that appears, enter the Tax Deregistration Date, and click Deregister.

Sales tax will not be applied to transactions created after this date. However, the state-level tax will still be applied to your transactions.

Undo Tax Deregistration

If you resume your business in a state again, or if you’re required to collect your taxes there, you can undo the deregistration to ensure that sales tax is calculated correctly. To do this:

Go to Settings.
Select Taxes under Taxes & Compliance in the Organization Settings pane.
In the Taxes pane, click Tax Registration.
Hover over the required tax registration and click the dropdown icon next to it.
Select Edit.
Click Undo Deregistration in the top right corner.
- If there are multiple local taxes under the state, click Undo All Deregistrations in the top right corner.
In the confirmation popup, click Undo Deregistration again.

The tax details will now be included in your transactions, and the sales tax will be calculated accordingly. Similary, you can also undo deregistration for a specific local tax.

Mark Tax Registrations as Inactive

If you want to temporarily prevent a specific tax registration from being applied to transactions, you can mark it as Inactive. Here’s how:

Go to Settings.
Select Taxes under Taxes & Compliance in the Organization Settings pane.
Select Tax Registration in the Taxes pane.
Hover over the required tax registration and click the dropdown icon next to it.
Select Mark As Inactive.
In the confirmation popup, click Mark As Inactive again.

The tax registration will be marked as Inactive.

To mark it active again:

In the Tax Registrations page, hover over the required tax registration and click the dropdown icon next to it.
Select Mark As Active.
In the confirmation popup, click Mark As Active again.

The tax registration will be marked as Active.

Disable Sales Tax Automation

If you no longer want sales tax to be auto-calculated for your transactions, you can disable Sales Tax Automation in Zoho Billing. Once disabled, the sales tax will no longer be applied automatically. To disable:

Go to Settings.
Select Taxes under Taxes & Compliance in the Organization Settings pane.
In the next page, click Tax Automation Settings in the Taxes pane.
Click Disable next to Sales Tax Automation.
In the confirmation popup, click Disable.

Sales Tax Automation will now be disabled in your Zoho Billing organization.

Switch From Sales Tax Automation to Calculating Taxes Manually

If you no longer want to use Sales Tax Automation, you can disable it and manage taxes manually. Then, create tax rates in the Taxes module and apply them to your transactions. Once disabled:

You can still view your existing tax registrations, but they cannot be applied to new transactions.
You must manually ensure that the correct taxes are applied to your transactions.
For subscriptions created before switching, ensure that correct sales tax is applied to any subscription invoices generated.

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