Billing

How service taxes and sales taxes are calculated

DT Practice calculates service tax and sales tax by checking the following items for each billed entry.
  1. Engagement:
    • If the engagement is not assigned to a tax area, no tax is calculated.
    • If the engagement is assigned to a tax area, go to step 2.
    note
    Tax areas are assigned to engagements in the Clients screen (Setup > Clients > Engagements tab).
    A tax area is a collection of assigned taxing authorities for a given geographic area. For example, the area in which a firm or client operates may have a state sales tax and a county sales tax. A tax area may also have different rates for goods and services.
  2. Activity:
    • If the activity is not set up to have service tax or sales tax charged, no tax is calculated.
    • If the activity is set up for service and/or sales taxes, go to step 3.
      note
      Activities are assigned taxes by marking the Tax calculation checkboxes in the Activities setup screen (Setup > Activities).
  3. The application identifies the tax area assigned to the engagement and multiplies the billed amount of the entry by all service and/or sales type taxing authority rates assigned to the tax area.
    note
    The billed amount takes into account any discounts or surcharges before taxes are applied. Discounts are distributed proportionately among the billed entries. For example, if the total billed is $500 and you enter a discount of $50, then each entry’s taxable billed amount is decreased by 10%. Surcharges are also applied proportionately to the taxable billed amount if the surcharge is a fixed amount. However, if the surcharge is based on the activity, then tax is applied at the entry level depending on whether or not the activity is taxable.

This article applies to:

  • Product: DT Practice