Taxes - Tax Areas
In this area, manage tax codes, tax areas and tax rules for tax codes. Prism comes with a default set of tax codes, but you can define additional tax codes as needed. You will need to create a tax area for each tax locale in which your business operates (define tax areas at the subsidiary level). Each store is assigned a tax area that determines the tax rate applied at POS for taxable items.
- A tax code is assigned to every item in inventory. The tax code defines categories of merchandise, such as clothing, food, and jewelry, which may be taxed differently within any given tax jurisdiction. Prism comes with a default set of tax codes that handle most situations; however, you can add as many custom tax codes as needed.
- Tax areas are comprised of one or more Tax Rules that define the specific taxing instructions to be applied to items with each tax code. The tax code might designate an item as clothing, but the actual tax rate applied to clothing would be specified by the Tax Rule for that Tax Code in that specific Tax Area. Typically, you will need a tax area for each tax jurisdiction in which you make sales. You can also set up special tax areas for things like sales of normally taxed items to tax-exempt organizations.
Node Preferences > Taxes > Tax Areas:
Tax Codes
The tax code identifies the item as belonging, for tax purposes, to a particular merchandise category. By default, new items are assigned a Tax Code of "TAX". Depending on the item and the locale, you can mark items as EXEMPT. If Luxury or other speciality taxes are used, you can define tax codes for those, too.To add a new tax code, click the Add button. Type a name (12 characters max). Click Save.
Tax Areas
A Tax Area is a specific tax locale where a tax rate is applied. Each Tax Area has one or more Tax Rules, with each tax rule specifying the tax rate for a specific Tax Code.
Click the Add button.
In the Add Tax Area screen, enter a Tax Area Name (12 characters max). (The Taxable Ceiling field is only applicable to certain locales. Leave the Taxable Ceiling field empty unless you are in one of those tax locales.)
Click Save. The Tax Area is added to the list.
Tax Rules
Each Tax Area has one or more Tax Rules that specify how tax is to be applied to items with the Tax Code for the Tax Rule.
To add a new tax rule, in the Tax Rules area, select the desired Tax Area from the dropdown and then click the Add button.
The Add Tax Rule modal is displayed. Enter a Name for the tax rule and select the tax code to which the rule applies.
Tax Rule Fields
| Field | Description |
|---|---|
| Name | Name of the tax area. Maximum 30 characters. |
| Tax Rule Code | A Tax Code is a label that designates the type of tax, if any that should be applied to the item. Each item is assigned a Tax Code. By default, items are assigned a Tax Code of TAXABLE. Each Tax Area can have its own rate defined for the TAXABLE Tax Code. Other default Tax Codes in Prism include EXEMPT. |
| Luxury | If selected, indicates that the tax rule will be applied as "Luxury Tax. Enabled = Apply tax as Luxury Tax. A Luxury Tax is different than a regular Sales Tax in that a Luxury Tax is typically only applied to the portion of an item's price above a certain threshold. This enables governments to tax so-called luxury items at a higher rate. |
| Rebate | Designates whether or not taxes applied by the Tax Rule can be rebated with Tax Rebate. Enabled = Taxes applied with this rule can be rebated. |
| VAT Margin | Designates whether or not VAT based tax values are calculated from the margin values.Normally with VAT you have a fixed sale price, a fixed VAT percentage and then calculate the price without tax from that P$ = P$T$ / (100%+Tax %);. If the "VAT Margin" option is selected in Prism Node Preferences > Taxes > Tax Areas, Prism will use the following calculation: Tax$ = P$T$ - P$ OR Tax$ = P$T$ * Tax% / (100%+Tax %). |
| Threshold 1 | Designates the threshold in which Tax Rate 1 begins to be applied. Note: Threshold 1 amount should be less than Threshold 2, and Threshold 2 amount should be less than Threshold 3. |
| Rate 1 | Designates the Tax Rate to be applied upon meeting Threshold 1. The actual methods for determining which portions of sale are taxed at Rate 1 may vary, depending on various settings. Specifically, the Luxury Tax flag determines if the rate slides fully or is segmented. |
| Threshold 2 | Designates the threshold in which Tax Rate 2 begins to be applied. |
| Rate 2 | Designates the Tax Rate to be applied upon meeting Threshold 2. |
| Threshold 3 | Designates the threshold in which Tax Rate 3 begins to be applied. |
| Rate 3 | Designates the Tax Rate to be applied upon meeting Threshold 3. |
Notes about Tax Areas
| Topic | Notes |
|---|---|
| Number of tax areas | If all of your sales are made within one tax jurisdiction, you may need only one tax area. If you sell under several jurisdictions, each with different tax reporting requirements, you will need tax areas for each. |
| Tax-exempt sales | If you make sales to tax-exempt organizations such as schools and churches, set up a tax-exempt tax area with zero tax for use on those sales. You will then be able to quickly select that tax area at POS and track receipts by tax area on reports. |
| VAT Rates | The rates for VAT are defined the same as for sales tax by simply entering the percentage in the first "Rate" column. Sliding taxes and luxury taxes should not be used with VAT. |
| Luxury tax | A luxury tax applies the specified tax rate to only the portion of the item's selling price that is above a defined threshold amount. Select the check box in the Luxury column. Enter the threshold amount above which the tax applies in the Threshold 1 column. Enter the tax percentage in the Rate 1 column. |
| Sliding tax | A sliding tax applies a different tax rate depending on the item's selling price. Enter up to three tax rates, each to apply to a different price range. Enter the selling price above which the rate applies in the At/Above column, and the percentage in the Rate column. Start by entering the lowest price range starting point in the Threshold1 column and its rate in the Rate 1 column. |
| Item tax threshold | Tax rates can optionally change at retail price thresholds or at quantity thresholds. You can specify in the tax area table the condition to use when defining your rate thresholds. |
| Assigning tax areas to stores | You must assign a tax area to each of your stores, so you should define your tax areas before defining your store locations in the store record. |
| Taxable ceiling | The Taxable Ceiling setting is designed to handle a special tax situation that exists in Florida (and possibly other locales). Florida law mandates a minimum sales tax rate collected by the state government. However, the law also allows each county to set its own local tax, up to the defined ceiling, that is collected on top of the general state rate. The tax applies only to the portion of the item price below the ceiling. |