Here is a video overview about managing taxes in ContractorTools:
The following is an indepth discussion about how to manage taxes in ContractorTools.
ContractorTools implements a “global tax model”. This means ContractorTools is designed to manage taxes in all locations in all countries. You may find that some features of ContractorTools tax management are not necessary for your location, and that is okay. As you will see, it is possible to configure ContractorTools tax management for any location.
Two Kinds Of Taxes
ContractorTools manages two kinds of taxes:
“Purchase tax” - the taxes you pay when you purchase materials and services.
“Sales tax” - the taxes you collect when you invoice customers for the materials and services you provide to your customers.
Both purchase taxes and sales taxes are defined by the following criteria:
Tax rate (percent)
Taxability - which types of costs (materials, labor, equipment, subcontract, and other) are taxable.
Tax authority - the government entity that collects the tax.
ContractorTools can be set up so that each tax location can have a different tax rate for each type of cost, depending on whether the cost is taxed at purchase or at sale. Whew. Here’s how it works…
Taxes Rates
A “Tax Rate” consists of two things:
The tax rate name.
The tax rate percent.
Simple enough. You can define any number of Tax Rates. You will need to define a separate Tax Rate for every combination of the following criteria that exist in your location:
Tax rate (percent).
Taxability - which types of costs (materials, labor, equipment, subcontract, and other) are taxable.
Tax authority - the government entity that collects the tax.
For example, if your regional tax authority requires that you collect 5% tax on the materials you sell, and 3% on the services you provide, then you will need to define two Tax Rates:
“Regional Tax Authority Materials” with a tax rate of 5%
“Regional Tax Authority Labor” with a tax rate of 3%
To define Tax Rates, go to the ContractorTools home screen and
Select "Company Settings"
Select "Tax Rates".
Tap a Tax Rate to edit, or tap + to add a Tax Rate.
Tax Rates consist of only a name and a tax percentage.
Tax Groups
Once you have defined all of the Tax Rates you will need, you can now assemble these into Tax Groups. A Tax Group defines a group of tax rates that can be applied to a job (or to individual cost items within a job).
If you only ever do business in a single location, then you will only need a single Tax Group that is applied to all of your jobs.
If you do business in multiple locations which have differing taxes, then you will need to define a different Tax Group for each location.
To define Tax Groups, go to the ContractorTools home screen, and
Select "Company Settings"
Select "Tax Groups".
Tap on a Tax Group to edit, or tap + to add a Tax Group.
A Tax Group consists of a name, and any number of “Tax Components”.
A Tax Component is a combination of a Tax Rate, and a set of Taxabilities (whether the tax applies to materials, labor, equipment, subcontract, or other costs).
Tap + to add a Tax Group.
Enter a name for the Tax Group
Then tap “Add a Tax Component”. This will take you to the Tax Component screen:
Tap “Tax Rate” to select a Tax Rate.
Then set the following “Taxable at Purchase” and “Taxable At Sale” switches on or off to determine the taxability.
Again...
“Taxable At Purchase” means you pay sales tax when you pay for the cost.
"Taxable at Sale" means you charge sales tax when you bill the customer.
Turn on “Invoice Purchase Tax” to invoices your customers for tax paid at purchase. This means the tax paid when you pay for these costs will be passed on to the customer.
The prompt for “Taxable Percentage” allows you to set the percentage of the cost that is taxable. Typically, this will be 100%, but in some locations it is less.
Continue adding Tax Components as necessary for the Tax Group (location).
Tap “Add a Tax Component” to add more tax components.
Assign Tax Groups to Jobs and Job Templates
Once you have defined all of the Tax Groups you need, you can assign them to your Jobs and Job Templates.
Note: When you create a job by copying it from a job template, the new job will contain all information in the job template, including markups, discount, and tax group. So be sure to set these in your job templates before creating jobs from them.
When you first install and run ContractorTools (in the US and Canada), it will automatically retrieve your local tax information and create the appropriate Tax Rates and Tax Groups. Then, the first time you attempt to create a job in ContractorTools, the Setup Assistant will step you through the process of setting the tax percentages and taxabilities for each Tax Group.
To assign a Tax Group to a job, go to the Job main menu and tap Job Info. Then tap on Tax Group…
To override the job Tax Group on an individual estimate line item, select the item in the Estimate screen, and tap on Overrides (near the bottom of the item information). Then tap on Tax Group to select the Tax Group for that item:
Important!
Please note that once you use a Tax Rate or Tax Group on a job or job item, you will not be able to change any of the information for that Tax Rate or Tax Group other than the name. If you try to, ContractorTools will ask if you would like to create a new Tax Rate or Tax Group. If you need to change a Tax Rate or any of the information in a Tax Group (other than the name), you will need to add new ones.
The reason is because if you change any of the information in a Tax Rate or Tax Group that is being used in a job, that would change the tax calculations for that job. So rather than allow you to do that, ContractorTools requires you to add new Tax Groups and Tax Rates.
How To Edit A Tax Rate Or Tax Group
If you only want to change the name of a tax rate or tax group, you can do that, and skip this section. If you want to change anything other than the name, please read on.
Typically, the only reason you will need to change a Tax Rate in ContractorTools is if the tax rate changes. In that case, it will make sense to create a new Tax Rate, and give it a new name (like “Austin City Tax 2016”). But if you accidentally entered the wrong information for a Tax Rate or Tax Group, and you really need to change it for jobs that it is applied to, then you will need to un-assign it from the jobs it is assigned to before you can edit it.
To un-assign a Tax Group from a job:
Go to Home > Jobs.
For each job in the list, select the job, go to Job Info > Tax Group and select the “Zero Tax Group” tax group.
Go to Home > Job Templates
For each job template in the list, select the job template, go to Job Info > Tax Group and select the “Zero Tax Group” tax group.
Once all jobs have been un-assigned from the Tax Group you need to edit, you can then edit it. To edit the Tax Group, go to Home > Company Settings > Tax Group.
After you edit the Tax Group, remember to re-assign it to all of the jobs it should be assigned to!