Just a sanity check on how to handle something… We have rental log cabins and use a totally separate booking system that collects customer payments .It also calculates tourism tax for the rentals, and sales tax for any upcharge/add-on items. All money is collected by credit card, and deposited into our checking daily. So I just see a deposits hitting our checking account and I need to break those out in Manager for proper accounting.
We do not use Manager to invoice our customers or anything like that. So would it be best to setup a couple Liability accounts, one for sales tax and one for tourism tax, and then break out each deposit accordingly? I figured I would edit each deposit transaction and break it out to Rents Received (positive amount), Merchant Service Fees (expense, negative amount), and then Sales and/or Tourism tax (liability, negative amount). The total transaction then would net out to the amount deposited in our checking.
Does that make sense, or would there be a better way of handling this?
Alternately, you could create the Tourism & Sales Tax (if they don’t exist) under Settings - Tax Codes…
Then when you do the Receive Money, nominate them against the revenue items and they will be automatically calculated without needing the extra lines.
But noting ; You can only do Tax Inclusive this way
Thank you @Brucanna! Awesome tips! I did already break out the add-on items since those are retail sales versus rental, I just forgot to mention it.
I’ll have to play around with the tax codes. We charge a 50% deposit on all rentals which doesn’t include the tourism tax, and then 21-days before arrival, we bill the remainder of the reservation and the full amount of tourism tax. So not sure if that would work with the way credit card/bank deposits are happening, but I will definitely check it out.
The tax code is working quite well for the Tourism tax. I ended up just letting Manager calculate the actual tax (6%) on every transaction. It was easier that way than having to flip back and forth to our booking system and figure out if it was a deposit or final payment. It will accumulate as “tax payble” and all work out in the end as I file the monthly returns.
The sales tax for upsell items was a bit more tricky. The daily credit card batches include the upsell items and sales tax, all lumped in. So I couldn’t figure out how to let Manager calculate the sales tax and and still have the total batch amount come out correct. So for upsell items, I’m just adding a line for the item(s) and another line for the sales tax.
@maudman, a new Guide on tax codes is under development that is more comprehensive than previous articles. It isn’t complete yet, and doesn’t appear on the Guides web site. But you can read it here: https://forum.manager.io/t/tax-codes/8901. Some of the discussion might be useful.
Thanks @Tut. I read the new guide, but I’m still a bit confused on a few things with tax codes.
One thing I’m not clear on is when I would use the “flat rate” check box. Leaving it unchecked seems to make the tax % inclusive, and checking the box seems to make it exclusive.
Also, the new guide mentions that Tax payable is a control account. I actually created two new liability accounts, one for Tourism tax, and one for Sales tax. It sounds like I didn’t really need to do that if Tax Payable keeps track of each tax code separate already.
In my situation, Tourism tax on cabin rentals is 6% and sales tax on upsell items is 7%. Our booking system accepts reservations, allows add-on of upsell items, calculates the tax on each, and collects payment. All the bookings/sales for each day get lumped together and deposited to our checking account by our merchant services processor.
An example might be a lump sum deposit of $992, which breaks out like this:
Rental 1 - $300 (which includes tourism tax in the amount)
Rental 2 - $300 (includes tourism tax)
Upsell Item 1 - $85
7% Sales Tax on upsell item 1 - $5.95
Rental 3 - $300 (includes tourism tax)
Merchant discount fee - $1.05
This would all get entered in my checking account as a “Receive Money” transaction with several line items.
So the tax code I setup for Tourism tax @ 6% works great because the tax is figured into the amount already. But for upsell items, I don’t want to have to figure out how much I’d have to enter for the item in order for the tax to be included in the amount (if that makes any sense).
I would ignore the flat tax check box - as you don’t have flat rate taxes.
The Tax Payable control account is associated with the default tax codes, as you are creating custom tax codes you can nominate your own accounts - each with their own account.
The Tax Payable control account is a single account so it “doesn’t” keep track of each tax separately.
If your upsell items come itemised separately 85.00 + 5.95 then you will need to enter them separately as Receive Money (currently) doesn’t allow tax exclusive entries. However if it comes as 90.95, then treat it similarly as a rental.
EDIT : you only need to create one tax code - Tourism, as the sales tax is being entered as a transaction (straight to its own liability account) rather than as a tax component of a transaction.
@Brucanna It sounds like I’m on the right track then… I’ll delete the Sale tax code I created since I shouldn’t need it as you indicated.
As far as the Tax payable account keeping track separately, I was just quoting from the new tax code guide @Tut linked to.
Tax amounts calculated from tax codes are posted to the Tax payable liability account, which appears automatically in your chart of accounts when a tax code is created. Tax payable is a control account, keeping separate track of each tax code used.
However, I will keep things setup as I have them now with my Tourism tax code going to my “Tax Payable: Tourism” liability account.
You’ve raised a bunch of separate issues, @maudman.
As @Brucanna said, only use the flat rate if you are operating under a flat rate scheme. You will know if you are. This is a separate issue from tax-inclusive versus tax-exclusive.
If you created your own regular liability accounts for different taxes, you lose a bunch of capability. Although the Tax payable account looks like a single account, it actually does track separate tax codes. The fact that it is a control account allows it to separate transactions for multiple tax codes, even though it doesn’t display that way. That is why when you look at a Tax Summary, for example, you see the breakout of all the different tax codes used during the defined time period. Control accounts, by definition, are made up of subaccounts. I think some improvements could be made in visibility of various tax code liabilities.
One complexity is that the tax-inclusive designation applies to everything on a form, such as a sales invoice.You cannot make that determination for individual line items. And the cash receipt form only takes tax-inclusive input. That’s a shortcoming that is going to remedied–soon, I hope.
Exactly, much like Accounts receivable, except the first step on drill-down is not to tax-level summary like the customer summary you get when drilling down on Accounts receivable. I wish it were so. That alone would go a long ways towards resolving shortcomings when using multi-component custom codes for taxes assessed together but payable to different authorities on different schedules.
