Service taxes and sales taxes calculations
Practice CS calculates service tax and sales tax by checking the following items for each billed entry.
- Engagement:
- If the engagement isn't 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 theClientsscreen (selectSetup,Clients, then go to theEngagementstab).
- Atax areais a collection of assigned taxing authorities for a given geographic area. For example, the area where 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.
- Activity:
- If the activity isn't 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.noteActivities are assigned taxes by marking theTax calculationcheckboxes in theActivities setupscreen (selectSetupthenActivities).
- 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.
