adding a flat tax

[Derek Atkins]

Hi,

Wendell <wkrause at ncodesys.com> writes:

> Hello all,
> How can I enter a flat tax to an invoice, such as a customs bill?
> If I enter an invoice amount, I would like to be able to pass on the
> customs tax in addition to the invoice for services. Is there a
> variable charge that I can apply?
> The taxes have percentages that I can apply but for instance the
> general sales tax is a percentage of the customs as well as the cost
> of the item. Since I cant find a place for formulas, would I just have
> to enter the entire amount including the taxes, then expense the taxes
> somewhere else? It seems a bit cumbersome.

Assuming the customs tax is a fixed percentage, you can compute the
nominal tax rate for the other tax and use that (because they combine
linearly).

For example, let's assume you have a 5% customs tax (CT), and then a 7%
tax (T) which includes the customs tax.

Now let's assume you have a $10 item.  Your customs tax is 5% of that,
which is $0.50, bringing your total to $10.50.  Now you need to apply a
7% tax to that, which is $0.74 (technically $0.735).  This is the same
as computing a 7.35% tax on your original price.

If you do the math you notice is that you can compute the direct value
(7.35%) as 7% + 7% of 5% == 7% + 7% * 5% = .07 + .035.

This generalizes out into the equation: T + CT*T == (1+CT)*T.  So for T
= 7% and CT = 5% you get (1 + .05) * .07 = 1.05 * .07 = 0.0735 = 7.35%.

So you can create a TaxTable with two entries.  The first entry is for
CT (5%).  The second entry is for T, but instead of entering 7% you
would enter 7.35%.

Hope this helps!

> Thanks,
> Wendell

-derek

-- 
       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
       Member, MIT Student Information Processing Board  (SIPB)
       URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
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