Tiered Tax Calculated By Line Item

Overview: Tiered taxes are utilized to calculate different taxes depending on the value of what is being taxed. Once the item/contract reaches the max taxable amount in tier 1, then it will calculate the remaining amount at the tier 2 tax rate and so on.

To create a tax jurisdiction with tiered tax by line item, go to Program Menu>Configuration>Accounting Configuration>Tax Tables, click on ‘Add’ in the bottom right or right-click any existing tax jurisdiction, and select ‘Tax Rate Change’ to replace.

1. Enter the beginning dates and description in the appropriate fields

2. Enter the max tax amount. (The total taxable dollar amount)

3. Enter the tax percentage rate under Tier 1 (Rental, Sale, Dam Wvr, and Road Tax).

4. Enter the dollar amount in the Taxable amount up to the field. This would change the percentage tax amount set under each tax field up to the dollar amount set in the Taxable Amount up to the field.

5. Enter a different percentage for the tax under tier 2 (and tier 3 if necessary). This would normally be a lower amount than tier 1.

6. Choose whether the tiered tax should calculate on the contract total, the line item extended price (line total), or the line item each price (line each). 

*Note: Once the jurisdiction is saved, there will be no option available to edit the rates.

In the example below, the tax percentage is set to 10%. This would charge 10% on any line item up to $1000. If the dollar amount was over $1000, then the tier 2 tax would be charged at 5%. It is being calculated on the line item extended price.
 

From the contract:

Example 1

With the tax rate set correctly under the information field, in this example, the tax amount is set to 10%, and the Amount up to is set to $1000. This would add a $100 tax to the contract.

Example 2

In this example, the amount on line 1, shows the item value at $1000, and line 2 value of $1200. Since the value of Line 2 is over $1000, it would use the tier 1 rate of 10% on the first $1000 and 5% on the remaining amount.

Line item 1: $1000 x .10 tax percentage = $100 in tax

Line item 2: $1000 x .10 + $200 x .05 tax percentage = $110.00 in tax

Total tax = $100 + $110 = $210.00 total tax

*Note: Damage Waiver and Item Percent taxes are calculated as if they were separate line items.