If one has configured taxes in ChargeMonk then it will be applied to invoices only. Don’t forget to configure taxes for each region where you have customers. Taxes are applied in ChargeMonk, whenever an invoice is created for either a renewal, subscription, or a one-time charge.
Based on the configuration offered as part of the tax settings, the service/ sales taxes are applied. In ChargeMonk, the configuration of taxes is offered at a service/product level. Moreover, at the same level country-specific taxes are configured.
At ChargeMonk you can also generate tax reports. Read Tax Reports to know more. Below is the list of steps to be followed to setup Tax settings in ChargeMonk.
Part 1: I am selling products which are liable to a single tax rate in a taxable country
Step 1: Add your Organization address
You should add the address of your Organization where you are based. Navigate to the Tax Settings page in your ChargeMonk site (Settings > Configure ChargeMonk > Business Profile) and click Add Address.
This is an obligatory step because without providing the address of Organization it is not possible to enable taxes in your ChargeMonk site. This information is required by ChargeMonk to calculate your tax liability.
Step 2: Enable Tax
Navigate to Settings > Configure ChargeMonk > Taxes and click Configure Tax.
Step 3: Set Price Type
The quoted price by you for your Service or Product or addon can be either:
- Inclusive of tax, which implies tax is included in the price, or
- Exclusive of tax, which implies tax is applied on the top of the product price
You will be selling in one or more currencies. You can customize the price type for each one.
Below given is an illustration of how the price types work:
|Product name||Unit Price||Currency||Price Type||Sample Tax Rate|
In such a case, both the professional and basic plans are priced at 150 and 100 USD respectively. The 'exclusive' price type signifies that a 5% tax rate will be included in this price on the invoice.
|TAX EXCLUSIVE||TAX INCLUSIVE|
|In case you specify the Price Type to Tax Exclusive, the tax will be calculated on and added to the charge that will arrive at the total payable amount.||In case you specify the Price Type to Tax Inclusive, the configured tax will be included as a part of the charge. The amount of tax will be obtained from the charge. That is, the amount of tax will be obtained from the total charge and will be displayed on the invoice.|
- In case a customer is allowed for the tax exemption, the amount of tax will be abstracted while invoicing from the total charge. If there are any discounts, they will be applied before the addition of tax. To check how to exempt a customer from tax payment, you can refer to the Customers page.
- Whether a product/add-on is marked as free from tax, the charge provided will be treated as exclusive of tax. If there are any discounts, they will be applied to this amount. To check how to mark a plan as non taxable, you can refer to the Plans page.
Step 3a: Set up Price Type for a region vs. Price Type for a currency
Price type regulations vary from country to country. Various countries, including the US, permit you to set your prices as exclusive or inclusive of tax as you see fit. Others, such as Australia or New Zealand, need your invoices to display a price specifically exclusive or inclusive of taxes.
ChargeMonk will help you to plan a scenario like this - you can also set your prices to tax exclusively in some regions and tax inclusive in others. In case you are selling to customers around the world in a particular currency, you can set your prices in that currency to be either tax exclusive or inclusive.In addition to this, whether some of the countries where you are selling have the regulations that require a particular price type then you can set your price to be either tax inclusive or tax exclusive in that country.
You are located in the US, selling any digital product at a rate of 100 USD. Imagine that you have customers in both New Zealand and India. Likewise, US India permits invoices to display an inclusive tax rate but New Zealand tax regulation requires invoices to display a tax exclusive price.
Now you want your prices to be exclusive of tax in New Zealand and inclusive of tax in the US and India.
How you can configure price types in the ChargeMonk:You first need to set your USD (currency) price type as Tax Inclusive and New Zealand (Region) to Tax Exclusive.
Below given is what your India, New Zealand and the US invoices would look like:
Price of your digital product: 100 USD
Price for the US customers: 100 USD (USD is tax inclusive)
In case you set India to ‘Tax Inclusive'
Price for the Indian customers: 100 USD (India is tax inclusive)
In case you set New Zealand to ‘Tax Exclusive':
Tax in New Zealand: 15%
Tax you to be charged to your New Zealand customers: $15
Price for the New Zealand customers: 86.95 USD + 13.05 USD (New Zealand is tax exclusive)
If you set a different price type for a country you are selling in and a different price type for a currency you are using then you cannot make the use of the reliable pricing feature (see next step).
Step 3b: Configure consistent pricing (for Tax inclusive)
In case you have a worldwide customer base and want to charge the same price to all the customers, use the Consistent Pricing option.
This option helps you to have a flat-rate charge for your service or product, in spite of the taxes applicable and the country or region of a customer.
- From catalog price remove the tax for non taxable regions
Go for this option in case you are selling your products in a country where you do not require to collect tax (say, from the UK to Mexico), but just want to perpetuate your consistent price.
Price in EU - £99 10% tax is included
Price in Mexico - £99 no tax included
- To calculate tax component in case of exemptions use my business location
ChargeMonk uses the location of the customer by default, to calculate the tax component to be deducted, in the case of exemptions. If you want ChargeMonk to calculate this based on the location of your business (as opposed to the customer's location), select this option.
Price for a regular customer - £99 inclusive of 10% tax
Price for a Tax exempted customer - £99 inclusive of 10% tax (if this option is not enabled)
Price for a Tax exempted customer - £99 inclusive of 10% tax (if this option is enabled)
Step 4: Add Regions
Now you can add countries where you have registered and are liable to collect the tax.
Just click on the Add Region option and select a country you want to add.
Once you are done with adding the countries, you can configure the tax rates for each country.
Step 4a: Configure tax details for each country - Capture Tax Registration Number
For each country that you add, the TAX Registration number can be provided for them as a part of the configuration. Refer to Capture Tax Registeration Number section for more.
Step 4b: Configure Tax Rates
You can add tax rates as per the requirement of the country where Taxes should be applied.
If multiple tax rates are to be applied, you can do that as well. Just click Add Tax Manually option to add your tax rates.
Provide the applicable tax rates and the label/text you like to see on the invoice:
Once, the rates are given, ChargeMonk will illustrate you a summary of the rates you have configured and display the options delete, clear or edit all the tax rates, if the need arises.
Step 5: Set up Product/Service level Tax Settings
In case you have set up a tax type in your Tax Settings, all your products are taxable by default. If some products are not taxable in your site, change your settings in ChargeMonk:
Via the web interface:
Disable This Plan/Addon is subject to taxes option by clicking the tab as shown:
While creating or editing a plan, switch the taxable parameter as false to mark a product 'non-taxable'.
PART II: SETUP MULTIPLE TAX PROFILES
I am selling products for the different tax rates in the same taxable country: configuring multiple tax profiles
ChargeMonk helps you by saving all your tax settings under an initial profile, namely "Primary" profile.
In case you are selling products of a single category and don't need to apply various tax rates, you can set up this single ‘primary' Tax Profile, with the tax rates set up across the countries you want to sell.
In case you are selling the products across diverse categories (like physical and digital goods for example), and need to apply different tax rates to the different products, in the same country, then different tax profiles can be created to cater to the different products/rates.
Let's suppose ABC Solar Company is your company and you are selling the following products in the UK and Europe:
- ‘Solar Monthly Digest' (the online magazine of the company) – with 20% Tax in the UK
- ‘Solar Panel installation services' - with 5% Tax in the UK This segment will help you to create two tax profiles in ChargeMonk using the ABC Solar use-case.
Step 1: Configure Multiple Tax Profiles
Let's suppose ABC Solar Company is your company and you are selling the following products in the UK and Europe:
Step 2: Naming the Tax profiles (to match the product category you will map this with)
Once the needed tax profiles are added, you can check the profiles in the Taxable regions added. Since ABC Solar need to apply for the EU's tax rates, here's the EU tax page:
According to the taken sample, you can provide the prices for each profile
- Profile 1: 20% of Tax is applicable for the sales of ‘Solar Monthly Digest' (the online magazine)
- Profile 2: 5% of Tax applicable to the sales of ‘Solar Panel installation services'
In this way you can map the Tax profiles to the particular product or products it concerns.
Step 3: Map a Profile to a Product/Addon
After a profile is created, you can map the profile to the suitable Products/Services.
In case you make only one profile, it will be mapped to your product catalog automatically. If you have created more than one profile, the DEFAULT profile will get mapped to all products. Now you can edit a different Tax profile and save it. Based on the saved tax settings, the tax rate will be applied for the subscription.
Capture Tax Registration Number
You can disable/enable Tax Registration Number to be captured (from your customers) as a common set of the site as shown here:
You can disable/enable the option to capture the Tax Registration Number in the Tax Settings page:
In addition to this, you can opt to disable/enable the Tax Registration Number for particular countries:
In case a country specific setting is configured, it will take the highest preference.
Next, select the ‘Label' displayed in the invoice according to the regulations (Tax Registration Number, VAT, ABN) and add your Tax Registration Number.
For the countries which are not configured in the Tax Jurisdiction list, ChargeMonk will display the label you have provided in Text configuration settings or Tax Registration number for Hosted pages.
You can provide the VAT Number through the vat number field via the following APIs:
Delete Tax Profiles
ChargeMonk offers you the option to delete your tax profiles. In order to delete an existing tax profile, go to Settings > Configure ChargeMonk > Taxes. Here you will find the current tax profiles and the option to delete them.
The deleted tax profile gets removed from every related taxable region/country.As per the existing invoices are concerned, the applied tax rates will not be changed.
- You cannot delete the Primary (Default) Tax Profile.
- A tax profile allied to a Plan/Addon cannot get deleted.
- In case you want to remove the tax profile associated with Plan/Add-on, the said Plan/Add-on requires to be linked to another tax profile or it should be made tax exempt.
- How to calculate tax for digital and physical services when billing and shipping addresses are given?
EU & New Zealand – In case you are selling the physical goods, ChargeMonk will consider Shipping Address Country for the calculation of tax. If Shipping Address is not available, then Billing Address Country will be considered.
In case you are selling the Digital products/services, ChargeMonk will consider only the Billing Address Country for calculation of tax.
For other countries, ChargeMonk considers Shipping Address Country or Billing Address'.
- Is the Tax profile setting up mandatory?
No, it is not mandatory to create multiple TAX Profiles. ChargeMonk will create First Profile (named ‘Primary') automatically.
- Who will use multiple Tax Profiles?
You can! In case you are selling different products at different rates in the same/multiple countries, the Tax Profiles option will help you to setup the different profiles for each product/region, so you can apply different tax rates easily.
- What if any particular product is sold in both physical and digital formats?
At the moment, you can map one product to one profile only (either physical or digital). In case you are selling the same product in physical and digital format, you need to create two different products in the ChargeMonk so you can map them to your two different profiles.
- What happens to the old invoices when I delete a tax country?
In case you make any alterations to your tax configuration, it will directly affect all the invoices that are created from that point onward. And your past invoices will not be customized to reflect the changes that you make to your tax configuration - which includes deleting a region/country.