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How Taxes Work

When designing the implementation of taxes we've tried to keep it simple yet flexible.

It all starts in the Business Editor. For each business you can define two taxes, each with a custom label and rate. There is also an additional option for tax 2 which can, if checked, make it so tax 2 is calculated based on the subtotal + the tax 1 cost. (Useful primarily for Canadians collecting Quebec Sale Tax.)

When you create a client for this business those tax details will be copied to the client.

When you create an invoice for this client those tax details will be copied to the invoice.

The idea is you initially setup the tax details at the business level and they are copied down the chain...

Business → Client → Invoice

The reason we copy instead of reference is that over time the tax rates can change and you don't want a tax rate change effecting old invoices. (More on how to update a tax rate later.) Additionally, this design of defaults lets different clients have different taxes if necessary.

When an invoice has a tax label you will see the coordinating column in the line item table. These checkboxes default to YES and represent if this line item is taxable for this column. If a line item is not taxable simply uncheck the box.

Tax Columns

When a tax rate changes

If you are collecting taxes for a large set of clients and the tax rate changes, use the business editor and change the tax rate. This will make sure all new clients get the updated rate. To update the current clients use the button labeled "Update Existing Clients" which will present a sheet.

Update Clients Button

Check the properties you'd like to copy to the existing clients of this business. This will make sure all new invoices will get the updated rate.

Update Clients Sheet

There is no way currently to update the tax rate for "Open" or "Estimate" invoices that have not yet been published to a client. You will need to manually update the tax details on the edit invoice sheet in such a case.