Luxury, VAT, and Sales Tax Minimums and Maximums

The advanced sales tax module is required to calculate the following sales tax rates. This optional module allows the user to create sales tax groups. Contact an EMBS representative to add this option to EBMS. Review the Inventory Tax Groups section for more details.

US States with Multiple Tax Rates

Some states require additional sales taxes for a specific group of products. For example, the state of Virginia has a sales tax rate of 5% for non food (4% is state and 1% is county). An additional 2.5% is levied for food items. Prepared food requires an additional 4% for a total of 11.5%.

The Virginia configuration described above would require the following five sales tax records:

Base State Tax of 4% with the category settings o: Applies to state
Base County Tax of 1% with the category setting of Applies to county
State tax for food of 1.5% with the category setting of Applies to state
County tax for food of 1% with the category setting of Applies to county
Local tax for processed foods of 4% with a category setting of Applies to county

Review Establishing Tax Rates for more details.

An alternative method to calculate sales tax including luxury and VAT taxes is the cloud TaxJar sales tax subscription. Review TaxJar > Overview for details.

Since rates are determined by inventory items, the following tax groups must be created:

Non-food items are taxed using records 1 - 2 listed above for a total rate of 5%.
Food items are taxed using records 1 - 4 listed above for a total rate of 7.5%.
Prepared food items are taxed using all five records for a total rate of 11.5%.

Review the Inventory Tax Groups section for more details on creating these tax groups.

Canadian PST and GST Tax

Provinces that collect GST and PST tax rather than a combined HST require the advanced sales tax module. For example in the province of Manitoba, service labor and fuel are exempt from GST tax. Tax groups should be created for each non-taxable product group.

Create a tax record for both GST and PST tax. Review Establishing Tax Rates for more details.

Create an inventory tax group for each group that is taxed differently by these two sales taxes. Review the Inventory Tax Groups section for more details.

Luxury Tax

A luxury tax charges a sales tax percentage for specific products such as expensive cars or jewelry. Certain luxury taxes charge luxury tax for items over a determined limit. Any luxury tax with a minimum or maximum requires advanced sales tax module. Complete the following steps to create this task.

Create a tax record for the luxury tax as shown below:
Select Sales > Sales Tax > Rates from the main EBMS menu to open the sales tax rate list. Select Edit > New to launch the New Sales Tax wizard as shown above. Review Establishing Tax Rates for more details on creating new tax rates.
Create an Inventory Tax Group to identify all the luxury items that are taxable by completing the following steps:

Click on the Inventory Tax Groups tab from within the sales tax rates dialog as shown below:
Select Edit > New to launch the following new tax group wizard:
Click next to open the tax rate list as shown below:
Select the 3rd option: This group's taxable settings vary for taxes in the selected folder as shown above. Review the Inventory Tax Groups section for more details on these options.
Enable the Taxable option for the Luxury Tax rate as shown above and enter the minimum price amount so that the tax only applies to luxury products that exceed a cost of $30,000.
Click OK to save the Inventory Tax Group settings. Review the Inventory Tax Groups section for more details on these settings.

Click on the Inventory Item tab to view the items that are within the current Inventory Tax Group. Items cannot be added within this tab. A product’s Tax Group must be set within the inventory item’s General tab. Review the Product Catalog > Changing Inventory Items section of the Inventory documentation for more details on changing product information including the tax group.

Review Establishing Tax Rates for more details.

Value Added Tax

Value added tax is a form of consumption tax that is a tax only on the value added to the product or service. Create an inventory tax group if the value added tax applies to a specific group of products. Create a value added tax record. Review Establishing Tax Rates for more details.