Sales taxes are charged according to the needs of your company and the area in which you do business. To set up sales taxes, first define the rate for each tax you use, and then combine one or more taxes into a tax code.
You can apply a tax code to specific items, vendors, or customers to identify applicable taxes.
For instance, some items that you sell may be tax exempt for some of your customers, such as a charity, who may have tax exempt status. When you complete a transaction, only the applicable taxes are charged.
When you create a new company with the Setup wizard, the program sets up sales taxes for you automatically (based on the province and industry-type you select); when you upgrade from an earlier version, Sage 50 Accounting does not change the sales taxes you have already set up for your company. However, you should review the taxes to check that you have all the taxes and rates you need, and set up additional ones if necessary. For example, if you sell goods or services in a neighbouring province that uses different sales taxes, you should set up taxes for those jurisdictions.
Industry-specific tax requirements
There are different tax requirements for different industry-types. Consult with your accountant or local tax authority for details:
| Industry | Description of tax requirements |
|---|---|
| Non-profit | Non-profit organizations have different rules than businesses regarding sales taxes. For instance, some charities are entitled to a rebate of a portion of the sales tax paid on operating expenses. In some circumstances, you can use a tax code which reverses the tax from the total. |
| Food and Beverage | The major difference between retail businesses and restaurants is in the application of taxes. Often there is differential sales tax treatment for food, beverages, and liquor. You may need to add some new tax codes to accommodate these situations. |
| Real Estate / Property Management | There are different tax treatments for rent received for commercial versus residential property. |
After you set up sales taxes and tax codes
- For new customers, select a default sales tax. If you don't want to use the default tax with some of your customers, you can change their sales tax.
- For new vendors, Sage 50 Accounting uses the first sales tax in your list of taxes. When you create a new vendor, you can change the sales tax you charge them.
- Tax-exempt status always takes precedence for inventory items and services. If you are buying or selling an item or service that is exempt from tax, Sage 50 Accounting does not calculate tax, even if the vendor or customer normally charges or pays it. Similarly, if you are selling a taxable item to a customer who has tax-exempt status, Sage 50 Accounting does not calculate tax.
- If you plan to use a Sage 50 Form that you've created or modified as your invoice, add your company and customer tax information to this form.