Audience – Builder/Trade/Supplier/Dealer for North American users
Read/Watch time – 10 mins
Article contents – How to steps/ Video
Buildxact allows you to configure the Tax Profile that is used to determine how tax is calculated on both your income and your expenses.
Proper configuration of tax settings is also crucial for seamless invoicing and integration with accounting systems, ensuring accurate tax calculations and preventing errors.
For specific advice on tax settings in different countries please use the buttons below
Configuring your Tax Profile is easy. It consists of:
The tax codes that are relevant for your business (e.g. GST, State Sales Tax, etc)
The tax rate for each tax code (e.g. 10%)
Which items those rates apply to (e.g. Materials, Labor, etc)
You can configure a default tax profile for your business, which will then be applied to each estimate you create. You can also customize the tax profile within an estimate if required.
NOTE: tax changes will only apply to new estimates/jobs or copies of old estimates.
How to customize your Tax Profile
1. Select My Business and click on Business Setup in the menu and then select Tax Rates. This will take you to the Tax Profile setup screen.
Next, you'll need to name your tax profile. Click "Edit" to set the name and short code for your profile. We suggest that you name your profile something recognizable that represents the taxes in your area. For example, in North America you might name your it "Tax Profile" and the Short Code might be "SST".
Note: The tax profile short code is displayed wherever tax calculations are referred to (e.g. Invoices, etc)
Once you have given your profile a name and a short code, you can begin managing the tax codes for this profile. Tax codes are used to track tax paid to and by your business. Each code represents a particular type of tax. For example, if you operate in North America you would have tax codes to represent each tax rate that applies, and a rate to represent tax free, you'd do this for both income and expense taxes. Your government taxation office will normally provide a list of taxation requirements businesses operating in that region must adhere to.
Each tax code will include the following:
1. Code: The "Code" should be easily recognizable and differentiate between income and expenses. For example, in USA you may need a Tax Code for Federal Income Tax on Income.
2. Description: Explains what this Tax Code represents.
3. Rate: Add the percentage rate to apply for this Tax Code.
4. Exempt: This will be to designate a tax free item. You will need one exempt items for Expenses and one exempt item for Income
5. Tax Code Type: Select whether the tax applies to income or expenses
6. Item Type: Select which types of items the tax code applies to - Material, Labor, Materials and Labour, Equipment or Subcontractor. Each line item in your Costings will include an Item type, and matching tax codes with the same item type will be automatically applied.
Note:
You must have at least one Income tax code and one Expense tax code in your profile. Click + to add additional tax codes.
Typically, you would also define an exemption tax code for both income and expenses to allow you to nominate tax-free items.
4. Once you have finished managing your tax codes, click the orange tick button to save your work. An example tax profile for North America may look something like this:
You have now set up your default tax profile for your business. This profile will automatically apply to all new estimates that you create.
Troubleshooting Tax-Related Issues and Preventing Invoice Sync Errors
To address tax setup issues when billing purchase orders instead of using a fixed-price contract, follow these steps:
Switch to Cost Plus Invoicing: If you intend to bill purchase orders, change the job to Cost Plus invoicing. This ensures that the purchase order’s tax rate determines the invoice’s tax rate.
Verify the Purchase Order Tax Rate: Confirm that the tax rate on the purchase order is set correctly. Adjust it if necessary to match your requirements.
Adjust the Job’s Tax Profile: Ensure the job’s tax profile aligns with your required GST or other tax settings. This step is crucial for accurate tax calculations on invoices.
Invoice sync errors often occur due to mismatched or incorrect tax profiles. To prevent and resolve these errors:
Set the Default Tax Profile: In Buildxact, navigate to Business Settings and confirm that the default tax profile is correct for your region and tax scheme. This profile will automatically apply to new invoices.
Correct Tax Profiles on Specific Invoices: If a sync error cites an incorrect tax profile, update the tax or tax code on the affected invoice to match the valid tax settings in your accounting system.
Re-run the Sync: After correcting the tax profile, attempt to sync the invoice again to ensure the issue is resolved.
How are Tax Profiles applied?
The Tax Codes within a Tax Profile are automatically applied to your Estimate items based on the item type. For example, if you have indicated that the SST-IN tax code should apply to 'Material', then this tax code will be applied to any Estimate item with an Item Type of 'Material'.
If necessary, you can override this by item by clicking on the Tax label:
Custom Tax Profiles per Estimate
Your Tax Profile will automatically apply to all new Estimates you create. You can see the tax profile applied to your estimate within the Estimate Details under "Tax Profile"
In some tax jurisdictions, there may be times when tax rates vary by job (e.g. when local sales tax differs by county). You can customize the tax profile for a particular Estimate by editing the estimate details and clicking "Customize" beside the tax profile.
Note: these changes apply to this Estimate only.
Best Practices for System Integration
Regularly Review Tax Settings: Periodically check your tax profiles and settings to ensure they remain accurate and aligned with any changes in tax regulations.
Test Syncing with Accounting Systems: Before finalizing invoices, test the synchronization process to identify and resolve potential issues early.
Document Tax Configuration Changes: Maintain a record of any changes made to tax settings or profiles for future reference and troubleshooting.