Tax Tables - an illustrated primer?

[Geert Janssens]

On zondag 3 september 2017 06:29:48 CEST Christopher Lam wrote:
> Hi Users & Devs,
> 
> I'd like to gather data on how Business > Tax Tables are currently being
> used by users. Tutorial is rather blank on this; says "set up your tax
> tables", "choose name, entries and percentage or amount", and in doubt,
> seek an accountant who usually doesn't use gnc.
> 
> From my understanding, Tax Tables are mainly used to *automatically*
> calculate various county and state taxes as applied to business invoices
> and bills... but it's rather confusing that:
> - menu is labelled 'Sales Tax Tables' but the tables are designed for both
> sales & purchase taxes

True. I have wondered about this also. I assume "Sales Tax" is a standard term 
in American English ? It helps to consider that the difference between an 
invoice or a bill is only from which side of the transaction you look at it. 
The bill you receive from your vendor is an invoice from their point of view. 
Strictly speaking they are all invoices, but the name bill was adopted in 
gnucash to make the differentiation easier (I was told it's a common name for 
invoices you have to pay).

> - multiple tax table entries are possible
> - each tax table entry allows *multiple* account selection, each with its
> own percentage/amount and tax account
I don't think this is exactly correct.
One can define multiple tax tables. Each tax table can have multiple tax table 
entries. And each entry has *exactly one* tax account.

> 
> So instead of delving deep into theory of taxes and how they apply, could
> users please let me know illustrated examples of how they have set up their
> tables in their jurisdiction, and example invoices/bills that apply? I'm
> especially keen on an example of an invoice/bill which has multiple
> entries, each with its own tax table, and the tax table entry incorporates
> multiple tax accounts. (If this makes any sense... because the software
> supports it!)
> 
Practical examples in Belgium:
Depending on the type of good or service being sold we have different tax 
(VAT/GST) regimes.
On 'luxury goods' (very broad term) we are required to charge 21% VAT
On food only 6% VAT is charged

That requires me to define two tax tables:
One for 21% VAT
One for 6% VAT

So whenever I buy a 'luxury good', I select the 21% VAT tax table for that 
good on the bill. When I buy groceries, I select that 6% VAT tax table. I can 
also shop in a big shopping mall and buy both something considered luxury and 
some groceries. In that case some lines on the bill will be assigned the 21% 
VAT tax table and some the 6% one.

Note these are very simple tax tables. They both have only one entry setting 
the percentage and an account to collect the VAT. It makes it easier for my 
VAT declaration to track the diffent VAT percentages in separate accounts so I 
have accounts for 6% VAT and 21% VAT.

On to a more complicated example: Europe has some special legislation 
regarding sales across country borders. When I sell something to a German 
client (being in Belgium myself), I don't have to charge VAT on the invoice, 
but I do have to declare this VAT to the VAT office in two separate lines:
- I have to count the VAT as 21% sales tax (adding it to all the VAT collected 
on invoices for Belgian customers)
- I have to add it to a special entry that counts all the VAT I did not 
collect because it was an intra-European sale.

To collect these numbers I have created an additional tax table, this time 
with 2 entries:
- the first entry is set up for 21% and the normal 21% VAT tax account
- the second entry is set up for -21% and a separate account (intra-Euro tax). 

So whenever I use this tax table two tax splits are created, one to declare 
the 21% VAT and one to neutralize it again accounting wise. When declaring my 
taxes I have to reverse the sign of the intra-Euro tax value but that's due to 
a mismatch in what gnucash generates as report and what the tax office expects 
as value.

There are other uses for tax tables with multiple entries. The most straight-
forward is no doubt the concept of multi-layered taxes. Some jurisdictions 
require to charge different taxes on one invoice: federal, state, county, each 
with their own percentages. Each of these taxes would have its own tax table 
entry in the same tax table.


> This could be used to populate the documentation with examples to follow.
> 
Good plan :)

> Ultimately I'll be keen to create a periodic report which sums all relevant
> data, such as for the Australian Tax Office which wants to know GSTs on
> sales & purchases every quarter.
This is not unique to Australia. The Belgian tax office expects this as well. 
The exact form of report is what differs from country to country. Since a few 
years now the Belgian Tax Office requires the user to upload an xml sheet 
adhering to a certain DTD. Gnucash can't create this (yet).

Geert