Destination-based sales tax (VAT, GST). Overriding vendor's tax calculation method.

Keywords: destination-based vs origin-based sales tax.

If sales taxes in your country depend on the vendor/customer region (state, province, county, etc., e.g. this applies in the USA), then you should add a Tax destination for that region and set it for vendors/customers (from that region). You also should add a Tax category for those destination sales taxes, then add a Tax destination line ("tax destination"-"tax category") for the items that you sell/buy to/from "other destination customers/suppliers". When you sell/buy these items to/from "other destination customers/suppliers", then "destination taxes" will be used instead of tax category of item (origin taxes).

Also, you are able to change the sales tax amount in an invoice line (for item basis method), or the total in an invoice (for invoice basis method).

Example of destination-based sales tax.

Assume Bob has sold the same items to the two customers - Mini-mart from New York, FSC from another state. Taxable items in NY (aggregate rate, item basis, half-up):

  • Cheese, STG4.7%, STG6.4%

  • Armchair, STG4.7%, STG6.4%

  • Sofa, STG4.7%, STG6.4%

  • Delivering, STS11%

Taxable items in another state (aggregate rate, invoice basis, half-down):

  • Cheese, STF2.7%, STF3.17%, STF1.234%

  • Armchair, non taxable

  • Sofa, origin taxable

  • Delivering, STF11%

Price inclusive of taxes for both cases.

After adding foreign state sales taxes and categories, add a foreign state "tax destination", e.g:

Then set this foreign state "tax destination" for the customer FSC:

Then set that foreign state "tax destination" and the taxes "STF2.7%, STF3.17%, STF1.234%" for the merchandise "Cheese":

* The delivering is made in the same way.

Then set the foreign state "tax destination" and clear the "tax category" field for the product "Armchair" to make it non-taxable in "another state":

Do nothing to make an item "origin-bases" taxable in another state (do this for the "Sofa").

Finally, make two invoices for local (Mini-mart) and foreign (FSC) customers with the same items and prices:

Omitting taxes in an invoice.

When a customer bought a merchandise for resale, then sales taxes may be omitted (it's applied in the USA for example), so just set "omit taxes" to "yes" in such invoices.