Tax Free Days or Tax Holiday basically incorporates reduction or elimination of tax on specific days of the year. On these days tax abatement, reduction or subsidy is prevalent for all. The Government of the city or country as whole usually keep tax free days as motivational objective for businesses to invest.
These days are set by the Government at both Local as well as sub national level and at times for National category also. It includes tax categories like:
1. Income Tax
2. Sales Tax
3. Property Tax and
Tax Free Days are offered for certain activities as well, with special emphasis on development of particular sectors for business purpose or to specific category of taxpayers. It was established that on Sales Tax Free days quantities in buying for household items like clothes and shoes the increase is of almost 49% and 45% respectively in comparison to other days.
As is already known by all QuickBooks users, any charges added under an invoice should be entered in the item list as well. Same is the case with Sales Tax. Under the item list, user will be required to generate one or more Sales Tax Items as is required in the invoice. To perform this function follow the steps detailed below:
1. In the dashboard select Preference tab from the main menu bar and then select ‘Add Sales Tax Item’ option. Alternatively, add the Item to Item list in the traditional way.
2. Lastly, type in the percentage of Sales Tax along with the name of the vendor to whom the payment is being made. Generally it is the Sales Tax Agency of the respective State.
Sales Tax Concepts
Before proceeding with steps illustrated above, there are certain concepts and measures that needs to be taken into account and setup. Most of these concepts are:
1. Preference option under Sales Tax should always be switched on.
2. While generating an invoice, user must be ready with a tax code for taxable customer, sales tax group or item, whichever is applicable, along with taxable charges that are set for being mentioned as taxable under the detail line.
3. User will require at least one Sales Tax Item along with more than one Sales Tax Group under their Item List.
Enable Sales Tax
The first step in processing Sales Tax is to enable the Preference option under Sales Tax. To do so, instructions are detailed below:
● Under the main screen of the software locate and click on ‘Edit’ option from the main menu and then followed by ‘Preference’ option from the list.
● Now select ‘Sales Tax Preference’
● Next when prompted select the option ‘Yes’ for Question – “Do You Charge Sales Tax?”
● Lastly for the questions asked in the bottom half of Preference screen, provide appropriate answers as per the requirement of the business.
Customers and Items
Last portion under Sales Tax that needs to be reviewed for successful setting up of the feature is regarding the Customers and items. Not all customers of the business are taxable which is the same for items as well, as some Items are taxable for business and some are not. User will need to setup sales tax for both, taxable customers and items, in order to have proper value of total tax. However, this section is optional and can be overridden by the user if required.
● In order to setup the process for customers, user needs to edit the section of customer and also specify the category of Sales tax item or group for that particular customer along with a required Tax Code.
● Under the category of Items, user needs to inform whether it is taxable or not and also provide the tax code for the tax.
Culmination of Sales Tax
The process to create an invoice for a particular customer is simple and at the same time a little complex for many new users. The basic standard values reported under the questions for Sales Tax are generally picked out from records maintained for the items and customers included within the invoice. There are three most imperative objects must be set to calculate accurate Sales Tax:
1. Taxable Customer Tax Code.
2. One Tax Group or Item should be selected.
3. Appropriate Tax Setting should be selected.
Accuracy in these three object will provide authentic Sales Tax amount.
User, however, has the option of overriding these settings if change is required for any particular situation, as shown below:
● In case a specific line is not taxable, then it should be set as non-taxable.
● In scenario, a particular customer is needed to be set with different rate of tax, user will be required to change the rate for that tax group or item in the invoice.
● Similarly, user can also reset the customer tax code for a particular customer.
The above details ensures that all imperative information regarding Sales Tax helps the user to calculate the exact Sales Tax needed to be charged. If however, user lands up into any problem regarding the same, they should immediately get in touch with expert QuickBooks professional team setup by Intuit.
Tax holiday 2022 in Louisiana will begin on May 26 and ends on May 27.