How service taxes and sales taxes are calculated

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Practice CS calculates service tax and sales tax by checking the following items for each billed entry.

  1. Engagement:
    • If the engagement is not assigned to a tax area, no tax is calculated.
    • If the engagement is assigned to a tax area, go to step 2.

    Note: Tax areas are assigned to engagements in the Clients screen (Setup > Clients > Engagements tab).

  2. Activity:
    • If the activity is not set up to have service tax or sales tax charged, no tax is calculated.
    • If the activity is set up for service and/or sales taxes, go to step 3.

      Note: Activities are assigned taxes by marking the Tax calculation checkboxes in the Activities setup screen (Setup > Activities).

  3. The application identifies the tax area assigned to the engagement and multiplies the billed amount of the entry by all service and/or sales type taxing authority rates assigned to the tax area.

    Note: The billed amount takes into account any discounts or surcharges before taxes are applied. Discounts are distributed proportionately among the billed entries. For example, if the total billed is $500 and you enter a discount of $50, then each entry’s taxable billed amount is decreased by 10%. Surcharges are also applied proportionately to the taxable billed amount if the surcharge is a fixed amount. However, if the surcharge is based on the activity, then tax is applied at the entry level depending on whether or not the activity is taxable.

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