Available on: Accounting Basic and Accounting Premium
Sales tax rates in Patriot Accounting control how much sales tax is added to the invoices and credits you create for your customers. This article explains how to add, edit, and inactivate sales tax rates, what to do if your business does not charge sales tax, and how to invoice a customer who is exempt from sales tax.
In this article:
Background
If your business is required to charge sales tax based on your location or the location of your customers, you can manage multiple sales tax rates to use when you create invoices and credits for your customers.
How to Add a New Sales Tax Rate
Before you can add a sales tax rate, you need to add at least one product or service to your Patriot Accounting account. Then, follow these steps:
Go to Settings > Accounting > Customer Invoices > Sales Tax Rates.
Select Add New.
Complete the Name and Rate fields.
Optional: click the star to make this sales tax rate your Default rate.
Click Save.
Your default sales tax rate automatically applies to new invoices you create. You can change the sales tax rate directly on an invoice, if needed, and you can add new sales tax rates while creating an invoice. For details, see Invoicing Your Customers.
How to Edit a Sales Tax Rate
Go to Settings > Accounting > Customer Invoices > Sales Tax Rates.
Click the Edit icon next to the sales tax rate you want to update.
You can change the Name or Rate.
If you change the Rate, the old sales tax rate becomes inactive.
Click Save.
An edited sales tax rate is not applied to previous invoices. Each invoice keeps the sales tax rate that was in effect when the invoice was created.
To view previous or inactive sales tax rates, turn on the Show Inactives toggle on the Sales Tax Rates screen.
How to Delete or Inactivate a Sales Tax Rate
Go to Settings > Accounting > Customer Invoices > Sales Tax Rates.
Locate the sales tax rate you want to delete.
Click the trash can icon at the end of the row.
đĄ Important: A sales tax rate that has been used on any customer invoice or credit cannot be deleted. Instead, inactivate the sales tax rate by unchecking the Active box.
To view inactive sales tax rates, turn on the Show Inactives toggle.
What If My Business Does Not Charge Sales Tax?
If your business does not charge sales tax, you do not need to set up a sales tax rate in Patriot Accounting. To make sure no sales tax is added to your invoices:
Do not add a sales tax rate. Without a sales tax rate, no sales tax is applied to your invoices.
Leave the sales tax box unchecked on your products and services. When you add a product or service under Accounting > Receivables > Products & Services, only check the sales tax box if that product or service is subject to sales tax.
Remove a sales tax rate you added by mistake. Delete the sales tax rate, or inactivate it if it was already used on an invoice or credit (see How to Delete or Inactivate a Sales Tax Rate). Make sure the sales tax rate is no longer starred as your default.
The Sales Tax Collected account in your chart of accounts is added automatically. If your business does not charge sales tax, the Sales Tax Collected account stays at $0, and you do not need to make any changes to it.
How to Invoice a Customer Who Is Exempt from Sales Tax
Some customers, such as nonprofits, government agencies, or businesses buying items for resale, may be exempt from paying sales tax. Patriot Accounting does not have a tax-exempt setting on the customer record, so you will choose a 0% sales tax rate on each invoice for a tax-exempt customer.
Step 1: Create a 0% sales tax rate
Go to Settings > Accounting > Customer Invoices > Sales Tax Rates.
Select Add New.
Enter a clear Name, such as "Tax Exempt," and enter 0 in the Rate field.
Do not star the 0% sales tax rate as your default.
Click Save.
Step 2: Select the 0% sales tax rate on the tax-exempt customer's invoice
When you create an invoice or credit for a tax-exempt customer under Accounting > Receivables > Invoices, change the sales tax rate on the invoice from your default sales tax rate to your 0% "Tax Exempt" rate before you save the invoice. Repeat this step on every invoice and credit for that tax-exempt customer.
Step 3: Keep the customer's exemption certificate on file
Tax-exempt customers usually provide an exemption certificate. You can store the exemption certificate on the customer's record in Patriot Accounting (available on both Accounting Basic and Accounting Premium):
Go to Accounting > Receivables > Customers and select the customer's name.
Click the Attachments link on the customer record.
Click Add Attachment, click Choose File, and select the exemption certificate on your computer.
Click Add Attachment.
For more details, see Adding Attachments to Vendors and Customers.