Tax Rates

Overview

In CORE, taxes can be charged on the service and expense items, and then passed on to the invoices, bills and other transactions. CORE handles taxes on time and expense line items, taxes on invoiced services and expenses, and taxes on top of taxes. You can specify three different tax rates–Tax 1, Tax 2 and Tax 3—per item, which CORE then sums up and applies the total percentage to the pre-tax bill amount. Additionally, you can apply a fourth main tax (Main Service Tax or Main Expense Tax) to the total service and expense amounts when invoicing. You might know them as Value Added Tax (VAT) in some countries like U.K. and as Goods and Services Tax (GST) in others like Canada. Sometimes, you have the combined Harmonized Sales Tax (HST) that replaces the provincial sales tax (PST) and GST. You can customize the tax labels for your jurisdictions using Custom Labels. GST can be applied pre-tax (A/P tax) or post-tax (A/R tax).

Note: Tax 1/2/3 amount is included in the contract amount, but the main tax is not.

You can set your own tax rates at different levels according to your requirements and location. If the tax authority in your area imposes taxes only on invoiced labor or expenses, then set up the main taxes (MST and MET). If the tax authority charges one tax on top of another, use both the main and item taxes.

Global Taxes

Client Taxes

Project Taxes

Item Taxes

Purchase Tax

Global Taxes

You can define the default rates for both item taxes (Tax Rate 1/2/3) as well as main taxes (MST and MET) at the global level in Settings > Billing & Invoices > Tax Rates. Each time you set up a new client , activity or expense item , CORE carries forward the global rates to them. However, you can edit them as needed. You can also set a ceiling on these taxes or choose to hide the tax fields, in case you do not use them.

Client Taxes

The default main tax rates (service tax and expense tax) from Settings are brought forward at the client level. You can change the rates on the Clients screen, if needed. You can also choose to exclude the item taxes, namely Tax 1/2/3, from the main taxes to avoid double taxation (tax on tax) for the client. We recommend selecting the tax exemption rule in the Projects screen instead, unless you are sure that all projects of a client have to be tax-exempt.

Project Taxes

The main tax rates (service tax and expense tax) from the Clients screen are brought forward at the project level. You can change the rates on the Projects screen, if needed.  You can also choose to exclude the item taxes, namely Tax 1/2/3, from the main taxes to avoid tax on tax for the project. We recommend selecting the tax exemption rule at the project level instead of the client level, unless you are sure that all projects of a client have to be tax-exempt. For new projects, taxes are inherited from the Clients screen, which in turn inherits it from Settings.

Item Taxes

Line item taxes for labor or services are set in the Activity Items screen. Similar taxes for expenses are set in the Expense Items screen. If you do not charge individual taxes on activities and expenses, you can ignore these fields. You can also do so on a company-wide basis from Settings.

Purchase Tax

Purchase Tax is very important for tracking of GST, HST or VAT. It enables you to know how much tax a company paid on an expense, how much tax the company collected from the client for that expense and the net balance. When you specify purchase tax in the Expense Items or Expense Entries screen, CORE figures out the correct cost amount before charging the client. For example, if you paid a taxi fare of $110 that included 10% GST, you can specify this as the purchase tax while recording that expense. CORE then calculates the charge amount for this expense on the pre-tax cost amount. Thus, while the company reimburses you for $110, it charges the client for $100 plus taxes (MET/GST specified at project or global level). However, if you do not use the purchase tax feature, you should enter expense costs excluding taxes.

Cost Amount = Net Cost Amount + Purchase Tax Rate

Cost with Purchase Tax = Amount without Purchase Tax / (1 + Purchase Tax Rate / 100)

You can run your VAT or GST reports that show the total taxes paid by your company and total taxes collected. The net is what you owe to the tax authority. 

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