# Sales Tax Error

I have encountered a problem with my sales tax calculation. The tax method is not rounding correctly. I’ve attached a photo

Notice on this invoice, the item total comes to \$13.94 before tax. The \$13.94 plus 8% sales tax comes to \$15.0552. In the US we are required to use the rounding method in a situation like this so the amount should be rounded to \$15.06. I know this is only a one cent difference but I have checked across my sales amount and my tax calculation is off which will cause me problems when I report my sale and tax amounts. My question is there any way to correct this problem? I can manually figure it out so I won’t get in trouble but hoping it can be corrected for future use. Since my tax code was not included, I made a custom tax code of 8% which is what is required in my state and county here in the US. I’m still really liking Manager so keep up the great work! If it is something that I can do to personally correct this problem please let me know.

Here is another that it did the same thing to as well.

The total came to \$86.61. The amount of \$86.61 plus 8% sales tax comes to \$93.5388 so it should be rounded to \$93.54. I have checked others where the amount came to several decimal places and it did those correctly so I’m not sure what’s going on.

Now here is one that it did correctly

The labor and parts comes to \$208.86. Labor here is not taxable so \$208.86 minus \$135.00 leaves the amount of \$73.86 that is taxable. The amount of \$73.86 plus 8% sales tax comes to \$79.7688 so it would be rounded to \$79.77. The labor price of \$135.00 plus the amount of taxed parts of \$79.77 comes to the correct amount of \$214.77. I just wanted to post this one as an example of how it did it correctly but the others I’ve posted it did not.

I encountered the same error with some companies. The problem is not a fault with Manager but rather the fact that different companies calculate the tax in different ways. Manager does the calculation line by line, but some companies do it by the total so the rounding up/down is sometimes off by a cent. I noticed the problem occurred with specific companies that I use. Although I have not had the issue for a few months, but what you need to do is change an item by a penny up or down to get the balances to match accordingly.

Almost all double-entry accounting systems calculate tax amounts per each line item first. There is technical reason for this.

Since you mention you are in USA, you really worry about something that is not an issue. Quickbooks is calculating tax amounts exactly the same way as Manager (that is line by line)

@lubos @dalacor Thanks! I was hoping it was not an error in the system but I could not figure out what was going on with it. I’ve personally never used quickbooks but I’ve been told it is pretty similar to Manager. I came close to using quickbooks but after all the bad feedback I decided to give Manager a try. I’m no accountant but love it so far. Has really helped me in my business and looking to use cloud version soon.

The only similarity between Quickbooks and Manager is that Quickbooks is easy to use compared to other accounting programs. But that is a relative term as Manager is by far easier to use than Quickbooks. The problem with a lot of accounting programs is that they are not designed for business owners to use. They are designed for accountants and are too difficult for business owners to use. This is the reason that Quickbooks and to a lesser extent Sage have been so successful.

However, people are leaving Quickbooks and Sage becauase of all the problems with support, running costs and the attitude of both Quickbooks and Sage Companies. In addition, while Quickbooks and Sage are far easier to use than most accounting programs, they are still relatively difficult to use and they are bloated. This is where Manager really scores - it is lightweight and very simple to use and is in constant development adding new features all the time.

I also nearly went with Quickbooks more because there was a complete absence of anything else suitable and then finally find Manager!

Hi Lubos,
I know this is an old topic, however same issue with me and considering line by line tax calculation, the calculation is still not correct for me. Referencing the attached. 6.25 x .03 (3% tax rate) equals \$.1875, that for each line of the \$6.25 items equals \$.75. The \$5.00 item tax equals \$.15 (5 x .03). Adding the two tax amounts .75 and .15 gives total tax of .90. The invoice is calculating (rounding??) to \$.91.

My online site is calculating at \$.90 so this gives a \$.01 difference (previous miscalculations also) in accounting for balancing accounts. I went in and changed the tax rate, however it messes up all previous invoices. I really don’t want a “misc” or other income line to balance the tax rate correction. Am I missing something as to why the calculation in manager is different than I get on a calculator? Many thanks!!

Yes, you are. \$0.1875 cannot be represented or charged under the US monetary system, so it is rounded to 0.19. 4 x 0.19 = 0.76. Add 0.15 and you get 0.91.

Not only is the tax calculated on a line by line basis, but rounding to match available currency divisions happens for each line, too. Suppose you only sold one bottle. You could not charge 0.1875 tax. You would have to charge 0.19. That does not change because you have multiple line items. Or suppose your customer returned all but one bottle and you had to issue a credit note. Realizable tax amounts would have to be backed out for each line item returned via credit note.

Depending on your price list, some of these tax amounts will round up, some down, cancelling each other out. Also remember, there is nothing in law that says the exact amount of sales tax charged to customers must be remitted to your state tax authority, right to the penny. You are going to remit 3% of taxable sales. You might end up with a slight overage or deficiency in your tax liability account for a given reporting period. That, too, will probably average out over time. Your state tax auditors will have seen all this before, many times. The only way it can possibly be avoided is to price everything in whole dollars and ensure your tax rates are always whole percentages. Obviously, neither is a realistic possibility.

By the way, this would still happen if you were doing things manually, adding all sales first and calculating tax on the subtotal. You would still need to round the tax amount to a whole cent.

Thanks for explaining the rounding. Do you recommend a practice to balance the amount due to \$0.00 as I will receive payment of \$37.90 and my invoices will show a \$.01 balance due? Journal entry adjustment?

Why will you receive payment of 37.90 when 37.91 is due?

Your last post is slightly confusing, @Rustictomato. You issued a sales invoice for 37.91. Yet you say you will receive 37.90. Why do you say that? Your customer (hopefully) will pay the full amount of 37.91, so there will be no mismatch in Accounts receivable.

The potential issue is that Manager’s method of applying tax results in 0.91, while other (equally valid) methods might determine 0.90. My personal recommendation would be to do nothing about this.

What I tried to point out previously is that, if your tax authority’s sales tax remittance forms are like most, you will report your taxable sales and calculate 3% of that figure. The amount you owe the state will actually have nothing to do with the balance of your tax liability account in Manager, but will be determined by the filing form. And next reporting period, the rounding may come out in the opposite direction. In fact, the net result of all your taxable invoices this reporting period may come out plus or minus by a small amount.

Sorry for the confusion. I understand about the taxing authorities. My question is directed to balancing receipts against balance due in Manager. The customer purchased items via my website two days ago, the total amount due the customer was \$37.90 (product, shipping and tax). The customer paid the amount due via credit card upon ordering, so they did not know the amount would be 37.91. Thus the amount I receive is \$30.00 for product, \$7.00 for shipping and \$0.90 for tax. The invoice on manager has an amount due of \$37.91. Per the invoice in manager the amounts will allocate correctly except for the difference of sales tax, \$.90 vs \$.91. Thus I will have a \$.01 amount due on my invoices.

So the real issue is that your web site (probably third party?) is calculating sales tax one way and Manager is calculating it another. So we have been discussing the wrong problem. There is an easy solution.

When you enter the receipt recording the customer’s payment (or the web site or credit card processor’s payment), record payment for the full amount of the invoice on one line, posted to Accounts receivable and the customer’s subaccount. This will avoid any mismatch in Accounts receivable. In your example, it looks like you are using a customer named Online Sales.

Add another line item, posted to the tax liability account to which your Food Sales Tax tax code is assigned. Make the amount equal to the negative of the difference in tax calculations. Since your example has Manager calculating .01 more than the web site, you would enter -.01. On a sales invoice where it came out the other way, you would post a positive number. The point is to make the total for the receipt equal the amount you received, but still have Manager’s amount for the sales invoice posted to Accounts receivable. Note, if there are other fees deducted from the end-customer’s remittance, they can be handled the same way, posting them to suitable expense accounts as negative numbers.

I will look at that. Thanks for the info!

Thinking about this more, I also wonder why you are using sales invoices at all. You are apparently aggregating all you online sales into a single customer. There is nothing wrong with that, but you have already given up the ability to do any reporting by end-customer. If you receive money directly into your bank account from the web site, why not just use receipts and bypass the sales invoice step? Or import your bank statement as a way of generating the receipts?

The only reason I can see for you to be creating sales invoices is if you get a sales report of some type from your web site (possibly daily?) but don’t actually get paid until some later time.

You can do exactly the same sort of thing I described before for handling calculated tax differences. Instead of allocating the first line item on the receipt to Accounts receivable, just allocate directly to an appropriate income account. Do exactly the same as I described for the second line item, allocating to the tax liability account.

I may have misunderstood some of the forum posts I read on receivables- cash, credit, and AP. We have some Invoiced accounts with terms that invoicing will work. Are you recommending using the “Receipts & Payments”, creating a new receipt for the sale where payment immediately transacts (in-person, website, etc) ? Will this account in the financials and reports same as it is now for income, cost of goods, expenses, etc? Appreciate the help, not being a finance major

Yes, you are just bypassing the sales invoice stage when you are not selling on credit. See Make cash sales (sell without sales invoices) | Manager.

This fall I had a similar case, when calculating the tax, and for some reason the numbers were rounded very sadly for me. As it turned out, the problem was that I applied to a company that calculates tax very poorly, after which I applied to another company and everything was fine. Different companies will calculate differently