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Feature Availability

Vtiger Editions: One Growth | One Pilot | One Professional | One Enterprise | One AI

Introduction

Tax is a mandatory fee levied by governments on products, services, income, or business activities. Managing taxes accurately is essential for compliance, transparent billing, and correct financial reporting.

Tax Management in Vtiger CRM allows organizations to define, control, and apply tax rates seamlessly across inventory and transaction modules. The feature supports national and international taxes, region-specific tax rules, and flexible calculation methods, ensuring accuracy across all sales and purchase transactions.

By using Tax Management, you can:

• Define taxes for a group of items and individual items.
• Define taxes for specific regions.
• Use the taxes for other inventory modules.
• Manage national and international taxes.

Key Features

The key features of Vtiger Tax Management are:

• Centralized tax configuration for all inventory and transaction modules.
• Support for both Group-level and Item-level tax application.
• Fixed and variable tax types to handle region-specific tax rules.
• Multiple tax calculation methods: Simple, Compound, and Deducted.
• Ability to manage national and international taxes in one system.
• Region-based tax application using configurable Tax Regions.
• Additional charge management with optional tax applicability.
• Support for simple and compound taxes on charges.
• Role-based and profile-based control over tax field editing.
• Automatic tax availability across Quotes, Sales Orders, Invoices, and Purchase Orders.
• Print Template merge fields for tax regions, deducted taxes, and charges.
• Consistent tax handling across Products, Services, and Inventory records.

Benefits

The benefits of Tax Management are:

• Ensures accurate tax calculation across all transactions.
• Supports regional, national, and international tax compliance.
• Reduces manual errors through centralized configuration.
• Handles complex tax scenarios, including compound and withheld taxes.
• Provides flexibility without compromising financial control.

In this article, you will learn about:

• Tax Management
• Setting up Taxes in Vtiger
• Types and modes of Tax
• Using Taxes in Inventory

Key Terminology

Accessing Tax Management Settings

Vtiger CRM includes multiple modules and configuration options. Follow the steps below to access the Tax Management settings:

1. Log in to your CRM account.
2. Go to the Main Menu.
3. Click Settings.
4. Click Tax Management under the Inventory section.
5. The Tax Management Settings page opens with three tabs:
   1. Taxes
   2. Charges(& its taxes)
   3. Regions

Each tab is used to configure different components of tax calculation and application.

Setting up Taxes

There are a few terms in tax management that you must know before starting to add a tax and using it in other modules.
In this section, you will be learning about,

• Tax modes
• Tax types
• Tax calculations
• Adding a tax

Where do taxes appear?

The tax value you specify is visible in the Item Details block of any Inventory record. After you define the tax rates in the CRM, they will be available for selection in Quotes, Sales Orders, Invoices, and Purchase Orders.

Tax modes 

 

Vtiger CRM supports the following two tax modes:

• Group Tax
  • Applies the same enabled taxes to all line items collectively. For example, if the total value of line items is INR 10000 and the group tax is 11%, then the post-tax value of items is INR 11100.
  • Taxes are calculated on the Items Total.
• Individual (Item Taxes)
  • Applies taxes at the individual line-item level. For example, if there are 10 line items and the individual tax is 11%, then the 11% tax is applied to each item’s value. The Grand total of items varies depending on the applied tax mode.
  • Product-level taxes configured in Products or Services are applied.
  • Adds a Tax tab in the Item Details section.

The selected default tax mode in Tax Management is automatically applied when creating inventory records.

Note:

• You can set the default tax mode in Settings > Inventory > Tax Management.
• When you have hundreds of line items, it’s a hassle to set taxes on each one. In this case, you can use a group tax to save time.
• If you have the Chart of Accounts installed, the Org account taxes, Contact account taxes, and Item account taxes are available.

Tax types

This feature enables you to create National and International taxes. 

There are two types of taxes:

• Fixed - Fixed taxes cannot have multiple values. 
• Variable - Variable taxes can have different values for separate tax regions.

Tax calculations

There are three ways to calculate taxes: Simple, Compound, and Deduction.

The following defines each calculation and the various combinations you can create with tax types:

Simple

Simple Tax is applied to the Items Total after the discount.  It is calculated as a single, straightforward percentage or as a direct value of a base amount, typically the total cost of the items after discounts, and the calculation is linear.

Combinations

Simple and Fixed

• The total amount remains constant for a specific period, even if output or income changes.
• Simple Taxes, such as VAT, Service Tax, Sales Tax, etc., can be fixed; i.e., the Tax value once added remains unchanged throughout.
• For example, Property Tax - A set amount based on the assessed value of property, which must be paid whether the property is used or sits vacant. 

Simple, Variable

• The total tax amount is directly proportional to the volume of output, sales, or income.
• Adding a simple tax when the tax type value is specified based on different regions. This is where the tax value is varied by region. If the value is not specified for the region, then the default value is considered.
• For example, Income tax (progressive) - The amount of tax owed increases as an individual's income rises, and the tax rate itself can vary across different income brackets.

Compound

Compound tax is calculated from one or more simple taxes. In essence, you are paying a tax on a tax.
For example, an item costs $100. There's a 5% state tax, making the price $105. A 10% federal compound tax is then applied, but the 10% is calculated on the new total of $105, not the original $100.
The total cost would be $100 + $5 + $10.50 = $115.50.

Note: A compound tax cannot have another compound tax within it.

Combinations

Compound, Fixed

• It applies multiple predefined, unchanging tax rates sequentially.
• Each tax is calculated on the subtotal plus the preceding tax(es). 
• The tax rates applied are static, unchanging percentages of their respective bases.
• For example, an item has a base price of $100. It is subject to a 5% state tax and a 10% federal tax (which is compounded).
  • State Tax: $100 * 5% = $5.00
  • New Subtotal: $100 + $5.00 = $105.00
  • Federal Tax: $105.00 * 10% = $10.50
  • Grand Total: $105.00 + $10.50 = $115.50
  • The rates (5% and 10%) are fixed, so this is a compound fixed tax calculation. 

Compound, Variable

• A compound tax structure where one or more of the tax rates are not static but can vary based on specific parameters, such as the product type, customer location, or other conditions.
• At least one of the tax rates in the compound calculation can change or be dependent on external factors (such as region, product type, etc.). 
• The calculation method remains compounding (tax on tax), but the rates themselves are dynamic.
• For example, a software system uses a default sales tax rate, but the rate varies by region. 
  • The default tax value is 5% 
  • USA region has a 10% rate 
  • Indian region has a 7% rate 
  • If an item in the USA is subject to a 10% state tax and a compounded 5% federal tax:
    • State Tax: $100 * 10% = $10.00
    • New Subtotal: $100 + $10.00 = $110.00
    • Federal Tax: $110.00 * 5% = $5.50
    • Grand Total: $110.00 + $5.50 = $115.50

In the example below, the 5% Tax Value can be adjusted by region. 

 

Note: Once the tax is created under a particular tax type, it cannot be changed to another type. For example, once you define a tax as a Simple Tax, you cannot change it to a Compound Tax or vice versa.

Deducted

Deducted Tax is useful when you have to withhold tax before paying the vendor. Deducted Taxes are computed on the Items Total and are deducted from the Total.

For example, in Spain, the IRPF tax is applied to self-employed individuals. Clients deduct the Tax before paying these individuals. The deducted tax value specified in the settings can be changed individually in the record.

Adding a Tax

You can add new taxes and use them when creating any inventory module record with the Item Details block, such as a Quote or an Invoice.

Follow these steps to add a new tax:

1. Log in to your CRM account.
2. Go to the Main Menu.
3. Click Settings​​​​​.
4. Click Tax Management in the Inventory section. The Tax Management page opens.
5. Click the Taxes tab.
6. Choose the Tax Mode - Group or Individual. 
7. Click +Add New Tax.
8. Enter the following information:
   1. Tax Name - Provide a name for the tax.
   2. Status - Enable the checkbox to activate the tax. If the tax is not marked as active, you cannot use it while creating a quote, invoice, sales order, or purchase order.
   3. Tax Calculation - Choose between Simple, Compound, or Deducted.
   4. Tax Type - Choose between Fixed or Variable.
   5. Tax Value - Enter the tax value as a percentage.
9. Click Save.

Note:

Setting up Charges

A Charge is an additional fee applied to the Items' Total on Invoices, Quotes, and Sales Orders, such as Shipping and Handling charges or delivery charges. Charges are not applied individually to Products or Services.

In this section, you will be learning about,

• Charge format
• Charge type
• Charge value
• Adding a charge
• Adding a tax charge

Where do Charges appear?

The charge value you specify is added directly to the Charges field in the Inventory records. This value is added to the Items Total amount after the overall discount is added.

Charge format

• Direct Price - This option lets you add a price value. For example, if the product costs $250, then the charge value added is $2. Here, the product's charge is added as a price, not as a percentage. 

 

• Percent - This option lets you add a charge value as a percentage. For example, if a product costs $250, the value-added charge can be 2% of the product cost. Here, the product's charge is expressed as a percentage, not a price. 

Charge type

Vtiger CRM offers two types of charges:

• Fixed - It is the default fixed charge value for all regions.
• Variable - Various charge values can be assigned to different regions. 

Charges can also be applied to specific regions.

First, you must set up a new tax for charging and specify the regions it applies to. Follow the steps below:

1. Log in to the CRM.
2. Go to the Main Menu.
3. Click Settings. The Settings page opens.
4. Click Tax Management under the Inventory section. The Tax Management page opens.
5. Click Charges(& its taxes) tab. The list of charges and its taxes page opens.
6. Click +Add New Tax for a Charge. The tax creation pop-up window opens.
7. Create a tax for a charge and mention the regions it should apply to.
8. Click Save.

Next, you must add a new charge, mark it as taxable, and add the tax you created previously. So now, whenever the charge you created is applied to an inventory record, taxes are applied based on the region.

For example, let’s say Freight tax has a default tax value of 2%, and a specific region,  say Bangalore, has a tax value of 2.5%. So if the Freight tax is added to a Charge, then that Charge for the Bangalore region will have a tax value of 2.5%.

Charge value

The Charge Value in the Add New Charge window is the default value in the Items Total in any record. You can change the charge value later.

For example, in Shipping and Handling Charge, you may have set the Charge Value for a Product to 100. In the invoice, you can change the Charge Value to 150 for that Product. All you have to do is click on the Charges field and enter the charge value of your choice.
 

Adding a Charge

When you add a new charge, a specific value is assigned to it, including all taxes.

Follow these steps to add a new tax:

1. Log in to your CRM account.
2. Go to the Main Menu.
3. Click Settings.
4. Go to the Inventory section.
5. Click Tax Management.
6. Click the Charges tab.
7. Click +Add New Charge.
8. Enter the following information:
   1. Charge Name - Provide a name for the charge.
   2. Charge Format - Choose between Direct Price or Percent.
   3. Charge Type - Choose between Fixed or Variable.
   4. Charge Value - Enter the value of the charge.
   5. Is Taxable - Enable the checkbox if taxes must be applied to the charge.
   6. Select Tax - Select the taxes on which the charge must be applied.
9. Click Save.

Note:

• A charge cannot be included in another charge.
• A charge doesn’t have the tax deducted from it.
• While creating any Inventory record, if the Charge contains a compound tax, but the simple tax within the compound tax is disabled, then that compound tax will behave like a simple tax for the Charge.
• For example, Import Charge has a compound tax, say Freight Tax (2%), that consists of simple taxes: VAT (1.5%) and Sales (1%). If both simple taxes are disabled when creating inventory records, the Freight Tax (2%) will behave like a simple tax.

Adding a Tax for a Charge

Adding a new tax for charging lets users add new taxes that can be used in charges. The tax can be either a Simple Tax or a Compound Tax. 

Note: These taxes will apply only to Charges, not to products or services.

The Is Taxable field in the Add new charge window must be enabled to display taxes on charges. The Select Tax field in the Add new charge window indicates that the charge applies only to taxes selected from the list of taxes for charges.

A charge can include any number of taxes. You can even change the tax value in the Inventory record accordingly. Refer to the screenshot below to change the tax value within that specific charge of that particular invoice. All you have to do is click on the Taxes on Charges field and change the values.
 

A Charge can be created such that:

• It shows only the charge amount, with no taxes added.
• It can have a composition of simple and compound taxes in it.
• Two or more different charges can have the same taxes added to them.

 

Setting up Tax Regions

It is the tax applied to specific regions. The region can be a particular location, a state, or a country. Tax regions will appear while creating variable taxes. You can select tax regions while creating Quotes, Invoices, Sales Orders, and Purchase Orders.

You have the choice of deleting a tax region, but deleting a region will affect all inventory taxes within the existing regions.

Follow these steps to add a tax region:

1. Log in to your CRM account.
2. Go to the Main Menu.
3. Click Settings.
4. Go to the Inventory section.
5. Click Tax Management.
6. Click Regions.
7. Click +Add New Region.
8. Enter the name of the region for which you want to define the tax amount.
9. Click Save.

Tax calculation based on tax regions

Consider the following three cases of calculating the taxes based on the tax region. You can select the region while creating or editing a simple inventory record.
Case 1: When the tax region is specified in the individual tax mode
 

The taxes, charges, and tax values specified for the region will appear in the calculation block. In the screenshot above, you can see the tax region and tax mode highlighted in red, indicating that the tax and discounts have been applied to every line item in the tax region of London.

Case 2: When the tax region is specified in group tax mode
 

The taxes, charges, and tax values specified for the region will appear in the calculation block. In the screenshot above, you can see that the tax mode for the region London is set to Group.  Hence, no tax or discount is applied to individual line items. But if you glance down, there is a Tax field whose value is applied for all the line items, i.e., to the Pre Tax Total field.

Case 3: When the tax region is not specified
 

When a tax region is not specified, the default values of taxes, charges, and charge taxes will appear in the calculation block. You can see that the default values are applied in the above screenshot because the Tax Region is not specified. Also, the Group Tax is added to the Pre-Tax Total amount.

Using Taxes in Inventory

From Products and Services

Given a choice, you can set the default tax values and the values based on the region’s record level in the Products and Services module.

To change the tax values in the Products and the Services modules, you have to enable them on the Tax Calculation Settings page. Then you will be able to change the tax rate for a specific region. 

Note: This is possible only if the tax is of the Variable type.

Print Templates in Taxes

Print templates are enhanced with Merge Fields having Tax Region, Deducted Tax, etc., related to Taxes. You can find these in the Merge Fields window under the Record Fields drop-down.

To know more about Print Templates, click here.
Note: The Shipping & Handling Tax merge tag is renamed as ‘Tax on charges,’ and the Shipping & Handling charges information merge tag is renamed as ‘Taxes on charges information.

 

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