Introduction 

Tax is a fee charged (or levied) by a government on a product, service, income, or activity.

Vtiger CRM gives you the flexibility to manage all your tax rates in a hassle-free way through the Tax Management feature. 

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.

Feature Availability

Locating Tax Management in the CRM

This section will explain how to navigate through the CRM and reach the Tax Management Settings page. Let us face it; Vtiger CRM has a plethora of modules and their respective settings.

Follow these steps to reach the Tax Management page:

1. Log in to your CRM account.
2. Click the User Menu icon on the top right corner of the page.
3. Click the Settings button.
4. Go to the Inventory section.
5. Click Tax Management.

The Tax Management Settings page opens.

On this page, you will see three tabs - Taxes, Charges, and Regions. Coming up in this article is a detailed explanation of every button, field, and section in these tabs. 

So without any further ado, let us jump in and understand how to set up taxes in Vtiger CRM.

Setting up Taxes: Taxes

There are a few terms in tax management that you must know before starting adding a tax and using it in other modules.

Now is the time you must channelize your energy and concentrate on the next few pages.

So 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:

1. Group Tax - When the Group Tax mode is enabled, taxes are applied to the total amount of the line items. 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.

You can set your tax mode to Group in a quote, invoice, sales order, or purchase order by going to the Item Details block > Configure > Tax Mode in the Detail View of the record.

Why do we use group taxes?
When you have hundreds of line items, it’s a hassle to define taxes on each of them. In this case, you can apply a group tax and save time. 

2. Individual Tax - When Individual Tax mode is enabled, taxes apply to individual line items. For Individual taxes to appear in the line items, you must configure them in Products and Services modules. 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.

Tax types 

This feature enables you to create National and International taxes. 

There are two types of taxes:

1. Fixed - Fixed taxes cannot have multiple values. 
2. Variable - Variable taxes can have different values for separate tax regions. Skip to the ‘Setting up Taxes: Tax Regions’ section to learn more.

Tax calculations

In this section, you will understand the different ways in which taxes are calculated. You will also learn the various combinations of tax types and tax combinations.

There are three ways in which taxes are calculated: Simple, Compound, and Deducted.

• Simple

It is applied to the Items Total after the discount.

• Combination One: Simple, Fixed - Simple Tax like VAT, Service Tax, Sales Tax, etc. can be fixed, i.e., the Tax value once added remains unchanged throughout. 

• Combination Two: Simple, Variable - Adding a simple tax when the tax type value is specified based on different regions. This is where the tax value is varied according to the regions. If the value is not specified for the region, then the default value is considered.

• Compound

It is a tax that is calculated using one or more simple taxes.

For example, assume that the product cost is $200 per unit. If compound tax is computed as 2% of the product’s tax value, then the product’s price after taxes is $242.76. Compound tax is calculated as 4.5% VAT+12.5% Service Tax+2% Sales Tax.  

• Combination Three: Compound, Fixed - A compound tax for which the Tax Type and Value are fixed.
  In the below example, the Tax Value of 6% cannot be changed. It is fixed. 

• Combination Four: Compound, Variable - You can add a compound tax where Tax Type and Value are specified based on the region.

In the below example, Tax Value 5% can be changed depending on the region. 

• Deducted

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

For example, in Spain, 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

Now that you know about different tax components let us learn about adding a tax. You can add new taxes and use them when creating a quote, invoice, sales order, or purchase order. 

Follow these steps to add a new tax:

1. Log in to your CRM account.
2. Click the User Menu icon on the top right corner of the page.
3. Click the Settings button.
4. Go to the Inventory section.
5. Click Tax Management.
6. Click the Taxes tab.
7. Choose the Tax Mode - Group or Individual. 
8. Click the +Add New Tax button.
9. Enter the following information:

1. Tax Name - Provide a name for the tax.
2. Status - Enable the checkbox to activate the tax. If 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. Skip to the ‘Tax calculations’ section to learn more. 
4. Tax Type - Choose between Fixed or Variable. Skip to the ‘Tax types’ section to learn more. 
5. Tax Value - Enter the tax value in percentage.

10. Click Save.

Note:  Taxes defined in Tax Management are global, not product-specific.  You can edit the tax by clicking the Pencil icon in the List View and update it with desired values.  You cannot delete a tax in Vtiger CRM. You can also enable or disable the existing tax, i.e., you can change the status to active or inactive.  All the tax values enabled in Tax Calculations will be available for selection in all Inventory modules. The tax rates on Invoices, Sales Orders, Purchase Orders, and Quotes will be calculated against taxes enabled in Tax Calculations. In other words, the taxes, if disabled in Tax Calculations, will be ignored and not used for calculating taxes. Tax fields for new roles and profiles are set to read-only by default to prevent unauthorized changes. Ensure that you provide read-write permissions to the desired Roles or Profiles.

 

Sharing Access for the Tax Type Field

As an admin, you can

• Set the Tax Type field to Read or Read/Write in the Line Items block of the Inventory module.
• Restrict team members from changing item-level taxes when using the Group Taxes field.

Setting up Taxes: 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 on Products or Services.

So in this section, you will be learning about,

• Charge format
• Charge type
• Charge value
• Adding a charge
• Adding a tax for 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 will enable you to add a charge value in terms of prices. For example, if the product costs $250, then the charge value added is $2. Here, the charge for the product is added in terms of prices and not in percentage. 

• Percent - This option will help you add a charge value in terms of percentage. For example, if a product costs $250, then the charge value-added can be 2% of the product cost. Here, the charge for the product is added in terms of percentage and not price. 

Charge type

Vtiger CRM offers two types of charges:

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

Charges can be applied to specific regions also. Here is the logic behind it. 

First, you must add a new tax for charge and specify the regions in it. Next, you must add a new charge, make it taxable, and add the tax that you created previously. So now, whenever the charge you created is applied on an inventory record, the taxes will be 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 added the Charge Value of a Product as 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, you will have a specific value assigned for that charge above all the taxes included within it.

Follow these steps to add a new tax:

1. Log in to your CRM account.
2. Click the User Menu icon on the top right corner of the page.
3. Click the Settings button.
4. Go to the Inventory section.
5. Click Tax Management.
6. Click the Charges tab.
7. Click the +Add New Charge button.
8. Enter the following information:

1. Charge Name - Provide a name for the charge.
2. Charge Format - Choose between Direct Price or Percent. Skip to the ‘Charge format’ section to learn more.
3. Charge Type - Choose between Fixed or Variable. Skip to the ‘Charge type’ section to learn more.
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.

Adding a tax for charge

Adding a new tax for charge helps the user add new taxes that could be used in charges. The tax can be either a Simple Tax or a Compound Tax. 

The Is Taxable field within the Add new charge window has to be enabled to show taxes on charges. The Select Tax field in the Add new charge window indicates that the charge is applicable only on taxes selected from the list of taxes for charges.

A charge can have any number of taxes included within it. You can even change the tax value in the Inventory record accordingly. Refer to the below screenshot 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:

1. It has only the charge value with no taxes added to it.
2. It can have a composition of simple and compound tax in it.
3. Two or more different charges can have the same taxes added to them.

Setting up Taxes: 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 Order, 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.

Note: If tax regions are not added in the Settings, then the drop-down is hidden for non-admin users in Inventory records.

Adding a tax region

Adding a tax region is very simple in Vtiger CRM. All you have to do is specify the region name.
 

Follow these steps to add a tax region:

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

Your tax region is saved.

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 individual tax mode
 

The taxes, charge, and charge taxes values specified for the region will be appearing in the calculation block. In the above screenshot, you can see the tax region and tax mode highlighted in red, specifying that the tax and discounts have been applied to every individual line item in the tax region, London.

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

The taxes, charge, and charge taxes values specified for the region will be appearing in the calculation block. In the above screenshot, you can see that the tax mode specified is Group for the region, London.  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 value of a tax for a specific region. 

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.