How does an estimate calculate sales tax? Why are there settings for two sales tax rates? My invoice isn't showing sales tax, what's wrong? The Sales Tax FAQ has all the answers:

Q. How is sales tax calculated?

Sales tax is calculated from two factors: the invoice's tax rate and whether tasks are taxable or non-taxable. Each task can be marked as "taxable" or "non-taxable" in the Edit Task web page, which helps determine whether sales tax is charged. Then when the job is added the task settings are copied to the job ticket. When an estimate is printed, Clients & Profits ASAP calculates sales tax based on the job's taxable tasks and their estimate amounts. When an A/R invoice is added the job task's settings are copied to the invoice. When an A/R invoice is posted, sales tax is calculated using the invoice's sales tax rates and the invoice's taxable billing amounts. Sales tax is added to the invoice's total.

Q. My invoice isn't showing sales tax, what's wrong?

First, check to see that the sales tax rate copied over from the client's file correctly. (Choose Accounting > Accounts Receivable, then click the Edit button. If the rate isn't there just add the correct percentages, then click Save. Find the client, then click on the Billing Information link.) If the rate isn't there you'll need to add the rate into the client's Billing Information as well. If the rate is there, it means that the tasks are not marked as taxable. Click on each task on the invoice to see if it is marked for sales tax and change it if necessary.

Q. Where is a client's sales tax information stored?

The client's Billing Information web page contains details about the county and tax rates. You can add information directly to the Client file. (Choose My > My Clients. Find the client, then click on the Billing Information link. Add sales tax information and press Save.) The county field is the client's sales tax region, which is usually a county but can be a city, state, or province. The sales tax report sub-totals sales by county, which is needed for government's sales tax returns. (Tip: The county field is case and space sensitive, so make sure you give each county the exact same name.) The rate is used to calculate sales tax on a client's estimates and invoices. This information is copied to the client's estimates and invoices automatically.

Q. Why are there settings for two sales tax rates?

Some jurisdictions require that county or city rates be listed separately on client invoices. The two sales tax rates are listed separately on estimates and invoices to provide more detailed sales tax information for your clients. Also, using two rates provide more detailed information on the Sales Tax Summary.

Q. How is sales tax and the Task Table related?

The tasks determine just what amounts are taxable. Each task in the Task Table can be marked as taxable or non-taxable, depending on its tax status. When tasks are copied to new job tickets, this default tax information is copied, too. Once a task is added to a job, it's tax settings can be changed -- without affecting the default tax information on the Task Table.

Q. Can the same client have taxable invoices as well as non-taxable invoices? For example, when the job is shipped out of state.

Yes. The job tasks on the client's A/R invoices determined what's taxed or what isn't. If the tasks on an invoice are taxable, then sales tax will be charged. If another invoice's tasks are marked as non-taxable (i.e., the sales tax checkbox is unchecked on the Edit Invoice page), then no sales tax will be calculated. Each invoice is independent of the others, so making one invoice non-taxable will not affect other invoices for the client. Changing the tax setting on one specific invoice doesn't affect the client's account information or its jobs.

Q. Can different tasks on the same invoice have different sales tax rates?

No. The sales tax rates are copied from the client's account to the invoice. They apply equally to all of the invoice's taxable tasks for sales tax rate 1 or 2.

Q. Do I need to add sales tax information to each client, or is there somewhere I can set it up for all clients?

Sales tax information needs to be entered for each client individually.

Q. When I enter the estimate should I include sales tax?

No. Sales tax is charged on the total estimate, based on which job tasks are marked as taxable. If the individual estimate amounts include sales tax, then you'll be charging sales tax twice!

Q. How does an estimate calculate sales tax?

When an estimate is printed, it calculates sales tax with the rate from the Client file for each task that is marked as taxable. The task settings come directly from the job ticket. Task settings were copied from the Task Table to the job ticket when the job was added. Task settings can be edited on an individual job ticket, if necessary. Unlike an invoice, an estimate does not copy the sales tax rate to it. If you wish to change the sales tax rate on an estimate, you must edit the Client file, then print the estimate. If you don't wish this change to be permanent for the client, then edit the Client file back to its original percentages after printing the estimate.

Q. Is sales tax included on the estimate amounts on job reports, like the Estimate vs. Billing report?

No. Both the estimate and billing totals for each job on these reports don't include sales tax. In all reports, sales tax is not factored into the job's budget, progress, or profitability.

Q. If certain types of jobs are always non-taxable, do I have to always remember to update the tax settings on their tasks?

No. When a new job is opened with an "always non-taxable" job type, all of the job's tasks will be set as non-taxable. The reverse is true for "always taxable" job types: any task on the job will be marked as taxable, even if it is non-taxable in the Task Table.

Q. How do I ensure that a certain client never gets charged sales tax? For example, non-profit clients.

Make sure the client has no sales tax rates in their billing information. As long as the client has no sales tax rate, no sales tax will be charged -- regardless of whether tasks are taxable or not.

Q. How does an invoice calculate sales tax?

When an invoice is created, sales tax rates are copied from the Client file. They can be edited on an invoice without affecting the client account. Task settings are copied to an invoice from the job ticket. Sales tax on an invoice is calculated based on an invoice's rate and task settings.

Q. Can Clients & Profits ASAP account for sales tax when some materials on the invoice are shipped out of state?

Yes. In this case, the tasks on the client's A/R invoice must be non-taxable. Sales tax applies to the total billing amount for each line item (i.e., task). If the invoice has a task for Printing that includes some deliveries in state and some out of state, you'll need to add the Printing task twice -- one that's taxable and another that isn't. The in-state (i.e., taxable) printing amount would need to be separated from the out-of-state (i.e., non-taxable) printing billing amount.

Q. What reports analyze sales tax?

A sales tax summary can be printed for any range of dates from A/R reports. The sales tax report lists each invoice, total invoice amount, taxable amount for each rate, and the amount of sales tax calculated for each rate. Invoices are sorted by the county name from the client's billing information. The taxable sales, non-taxable sales, and sales tax amounts on this report make compiling your sales tax returns easy.

Q. Does Clients & Profits use the accrual method or cash-basis method of accounting for sales tax reports?

Clients & Profits recognizes revenue on an accrual basis (i.e., when Accounts Receivable invoices are posted); therefore, sales tax reports are calculated on an accrual basis, too.

Q. All of these sales tax regulations are confusing. Where can I find out what to tax and when?

It's critical to consult a CPA that's qualified help ad agencies and design firms decide sales tax issues. It's very complex, and the liability for making a bad guess is great. Many states have publications explaining sales tax laws in your jurisdiction. The Federation of Tax Administrators web site has links to the web site for the taxing authority in each state, and should contain sales tax information or phone numbers for you to get additional information.

Q. What should I do with sales tax on A/P invoices?

If you are not tax-exempt and must pay sales tax to your vendors, then sales tax is considered part of the cost of the purchase. Sales tax should be included in the total cost when you are adding an A/P invoice.

Q. Why are invoices for a non-taxable client showing up on the sales tax report?

You have your tasks on jobs for this client marked taxable. This will cause invoices for this client to be marked taxable. These invoices will then show up on the sales tax report as taxable invoice, but calculate no sales tax. Just mark these tasks as non-taxable when invoicing jobs for your non-taxable clients to prevent this.