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Sara asks:
Q: With the new year comes new tax rates for my county, which affects a couple of the tax rates I have set up in Xero. Should I just go into the existing rates and update them? If I do that, will all the past transactions that used that rate be affected?
Let’s talk about Sales Tax Updates, baby! Learn how to add new tax rates in Xero.
A: If you try to edit a Tax Rate that has been used in a transaction, the fields will be grayed out and you won’t be able to change it.
Tip: Note the padlock next to the Tax Rate: This means the tax has been used as a default in the Chart of Accounts or in a recurring Invoice or Bill.
Add the New Tax Rates & then:
1. You can Unlock the Padlock by clicking the number of accounts using it and selecting a new tax rate for them, or editing the recurring transaction to a new tax rate.
2. If there is no Padlock, or after you have unlocked it, you can delete the old tax rates so they no longer show up to be used. This will not affect past transactions.
If you’re wondering HOw you should be charging Sales Tax:
This varies state by state. You must know your own state’s requirements. NY for example is a destination based state, so you do have to load all tax rates for the state, county/city/districts that you may ship to within the state of New York and to states where you have a physical presence, such as a store (your wholesale clients don’t count because they will collect and remit sales tax), or sales rep.
Sales tax is only calculated when you’re shopping within your state or states where you have a physical presence.
Here’s my favorite article to explain the tax rates in different states:http://blog.taxjar.com/charging-sales-tax-rates/
Download the sales tax rate table for your state:
Here also is my favorite place to export excel data for each state’s rates for websites that you have to manually import the rates (unlike Shopify, Shopify is the best!!! All around for best integration to accounting programs, to reports, to everything as far as I’m concerned, worth every penny for shop-type websites). From Avalara:
http://www.taxrates.com/download-tax-tables/
My favorite quick search tool for looking up one-off rates is http://www.sale-tax.com/
Update: to learn about what has changed for Out of State Sellers and collecting Sales Tax, you’ll want to read Sales Tax Requirements for Economic Nexus on Out of State Sellers
