Taxes

Introduction

The ease with which you may configure LightSpeed for the application of sales taxes applicable in your geographic region should not belie its importance.  Tax settings may vary greatly between cities and counties, let alone countries, and LightSpeed’s Tax setup panel is able to accommodate requirements, both simple and complex, you may need applied to your sales.

This guide expands on the tax setup instructions from the LightSpeed Getting Started Guide, and includes examples for a more thorough illustration of setup. 

Set up your Taxes (Tools > Setup > Taxes)

The Taxes section of the Taxes setup panel is where an Administrator will enter the names of up to five taxes and set their GL Accounts.

Tax Codes specify which taxes and which rates are charged in a particular jurisdiction or circumstance. The default Tax Code is the Tax Code that is automatically applied when creating a new sales document, and is set in the Station Setup panel. You can create additional Tax Codes for charging out-of-state taxes. An unlimited number of Tax Codes can be created. Tax Codes affect the taxes charged on a per-document basis.

Tax Statuses are used for particular tax exemptions. If a Customer is entitled to certain tax exemptions, or a Product is exempt from certain taxes, one can apply the corresponding Tax Status.

The basic overview is as follows:

1. Name the taxes that will be charged in the Taxes section.  Do not set rates in this section.  
2. Modify the Default Tax Code (“US”)  to charge the appropriate tax rates on your sales documents.  Rename it to reflect the Tax Code you want to appear on documents.  Enter a rate for each tax, but without the % sign. 
3. Create new Tax Codes for any alternate tax scenarios (if any). 
4. Create Tax Statuses for Product-level exemptions of particular taxes. 

Specialized Tax Features

Taxes also have the ability to be configured according to local specifications, accessible only by checking the Show Specialized Tax Features checkbox. In the column marked (1), you can indicate a maximum dollar value for the tax collected.  In (2), the checkbox indicates the tax is compounded on the sum of the subtotal plus the taxes. In (3), the checkbox indicates a tax that is Paid and must be assigned a GL Account for the export to the accounting package. 

1. Maximum Tax - allows you to set a maximum dollar amount that can be charged in tax (eg. parts of Alaska)
2. Compounded Tax - allows you to calculate tax based on subtotal plus any other taxes levied on document (eg. Quebec QST)
3. Exported to GL Account (Paid) - allows you enter a GL Account to track the payment of this tax, as opposed to its collection (eg. some Canadian provinces)

None of these features should be used unless they apply to your specific region.  If you are unsure, please contact Xsilva Support. 

Tax-Inclusive Pricing

At the bottom of the main Tax section, there is a checkbox that enables LightSpeed to calculate its taxes differently. The Tax Inclusive Prices is designed for regions with particular tax calculation involving a requirement for tax-in totals. IMPORTANT: It is recommended that unless you are in such a region, you do not use this option.

Tax-Inclusive Pricing (TIP) displays all prices with the Default Tax Code already applied.  For example, if a retailer’s Default Tax Code applies a 10% tax to all Products, a Product normally priced at $100 would appear as being priced at $110 with Tax-Inclusive Pricing enabled. 

When TIP is enabled, both prices appear in the Product card.  However, on documents, only the tax-inclusive price will be displayed, while the sub-total, tax breakdown, and totals will appear as they do without TIP. 

Note: You can set either the tax-out or tax-in price for a Product in one of two ways; first, in the Product card, you can click the Selling Price field, which will calculate the Tax-Inclusive Price using the default Tax Code, or you can click the tax-in price to calculate the regular Selling Price.  Second, you can use Set Selling Prices to set either the regular Selling Price or the Tax-Inclusive Price. 

Modifications

If there are modifications to the sales taxes in your region, you must make the necessary changes to the LightSpeed Tax setup panel to reflect the change. Most modifications of this type will involve the adjustment of a tax rate.  

In order to prevent the accidental modification of legacy sales documents, it is recommended that you create a new default Tax Code to apply the adjusted rate(s). Otherwise, modifying an existing Tax Code could result in legacy sales documents automatically adopting the new rate upon being accessed.

In the event where a new tax is being created, it is recommended that you create the new Tax without modifying an existing Tax. Then, create a new Tax Code to apply the proper rate(s) and make it the default Tax Code. If you have any questions, please contact Xsilva Support.

Examples

Example 1

A shoe store in San Francisco applies a sales tax of 9.5% on all its sales.

1. Rename the “US” Tax (in the top section) to “TAX”.  
2. Rename the default Tax Code to “Standard” and set the rate of “TAX” to 9.5.   

Example 2

There is a store in Happytown, Pennsylvania.   Their sales are subject to the state tax, which is 6%, but there is also a city tax of 4% for sales to residents of Happytown, and must be listed separately.  If they sell to anyone else, they need only charge the state tax.

1. In the top section, name two taxes, “State” and “City”.
2. Rename the default Tax Code to “HAP” and set it to charge a “State” tax rate of  6% and a “City” tax rate of 4%.
3. Create a new Tax Code named “REG”  that charges a “State” tax rate of 6%.  

Now, a standard sale to the Happytowners will default to the “HAP” Tax Code and apply 10% tax, listing each tax separately.  However, when a resident of nearby Pleasantville buys, the Tax Code can be switched to “REG”, which charges 6% only.

Example 3

A kids’ store in Ontario selling assorted clothing, books, and puzzles for little ones charges 2 taxes, a provincial tax (PST) and a federal tax (GST).  Due to a change in the way sales taxes are to be charged, they must change their tax setup to reflect only a new Harmonized Sales Tax (HST).  Clothing and books are exempt from all taxation. 

1. Create a new Tax (in the top section) called “HST”.  Do not modify or delete existing Taxes. 
2. Create a new Tax Code and name it “HST”.  Set it to apply a rate of 13% for the “HST” Tax.  Make it the default Tax Code by dragging it to the top of the list.  Do not delete existing Tax Codes. 
3. Set each Sales Station to have HST as the default Tax Code. 
4. Modify the “No Tax” Tax Status to exempt HST only. 
5. Use Set Product Info to set the Tax Status of all Products with the Classes “Clothing” and “Books” to “No Tax”. 

Example 4

A toy store in Sydney is setting up their database.  They use tax-inclusive pricing, and they charge one tax called GST.   

1. Create one Tax called “GST”.
2. Modify the default Tax Code to charge the appropriate rate of 10%.  
3. Enable Show Specialized Tax Features, then enable the “Recommended” setting for Tax-Inclusive Pricing. 

Example 5

There is a multi-store retailer with locations in New York City and Albany, NY.   Taxes in New York state are a combined rate of city, state, and various taxes.

1. In each store’s database, name one Tax - “Sales”.
2. In the New York City location, modify the default Tax Code to apply a rate of 8.875 for the tax named “Sales”.  Rename the Tax Code if desired. 
3. In the Albany store, modify the default Tax Code to apply a rate of 8.0 for the Tax named “Sales”.  Rename the Tax Code if desired. 

Example 6

In New York City, clothing sales under $110 are not subject to sales tax. 

1. Follow Steps 1 and 2 in Example 5. 
2. Use Set Product Info to set the Tax Status of all Products with the Class “Clothing” and a Selling Price of less than $110 to “No Tax”.