No matter how complex your government makes taxes, CostCertified has you sorted.
Some jurisdictions charge different tax rates depending on whether the revenue is considered margin/profit vs whether it is considered a cost, and some even charge different tax rates for materials profit vs profit on labor or costs on materials vs cost on labor!
Steps to add complex tax
1. From the tax dropdown on the proposal or in your Tax management page from the services panel, create new or edit existing tax.
2. Add one or multiple taxes to each of the categories.
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Basic sales tax: tax on the price of the item
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Sales tax on labor: tax on the labor component of the item
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Sales tax on subcontractors: tax on items that are subcontracted
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Sales tax on materials: tax on the materials component of the item
3. Choose the inclusion type of the tax, for example is it meant to be on the cost of the item, the profit of the item or the price of the item (cost and profit combined).
4.Save.
A practical example
For example, if you add a tax on the labor of an item, and have an inclusion type for profit, meaning you are specifying a tax rate for the profit generated from the labor component of the item, then the labor cost will be calculated as a percentage of the total costs, and that weight ratio will be used to apply tax to that item.
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An item that has a price of 1,500, where
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250 is the cost of labor, and
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750 is the cost of materials, and
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500 is the profit
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with a sales tax applied to the profit derived from the labor component of the item of 5% will charge a tax of 6.25.
