Applying taxes on an invoice

Taxes (such as VAT or sales tax) increase the invoice total and are collected on behalf of the government or tax authority. In Usystems, you can set up tax rates on individual items or apply them at the invoice level. Taxes are calculated on the subtotal after any discounts are applied.

Before you start

• Your role must allow you to edit invoices.
• Your system administrator must have created the tax rates you plan to use (in Settings → Tax Rates).
• Know which tax rate(s) apply to the items you're selling.
• Understand whether tax should be applied to the pre-discount or post-discount amount (your administrator usually sets this).

Steps

1. Go to Invoices → New Invoice (or open an existing draft invoice to edit). Open in Usystems

2. Select the customer and add line items.

3. For each item, choose a Tax Rate from the dropdown (if available):

   • If the item has a tax rate assigned by default (from the product record), it appears pre-selected.
   • Click the dropdown to choose a different tax rate, or leave it blank if the item is not taxable.

4. The tax amount for that item is calculated automatically based on the tax rate and the item's subtotal (after any line discount).

5. Scroll to the invoice total section. You will see:

   • Subtotal (sum of all item amounts, after discounts)
   • Tax (sum of all item taxes)
   • Total (subtotal + tax)

6. Review the amounts. If you need to apply an additional invoice-level tax (less common), ask your administrator or refer to your system's tax configuration.

7. Save or submit the invoice.

Accounting impact

When an invoice with taxes is confirmed:

• The Sales Revenue account is credited with the subtotal (excluding tax).
• The Tax Payable account is credited with the total tax amount (you owe this to the tax authority).
• The Accounts Receivable account is debited with the total (subtotal + tax), because the customer must pay both.
• When you later pay the tax authority, the Tax Payable account is debited.

Tips & common mistakes

• Taxes apply after discounts. A 10% line discount is applied first, then tax is calculated on the reduced amount.
• Tax-exempt items. If an item should not be taxed (e.g., exempt goods), set its tax rate to 0% or leave it blank.
• Mixed-tax invoices. A single invoice can have items with different tax rates; each item's tax is calculated separately.
• Tax on tax is rare. Usually, tax is calculated only once per item. If your system supports tax-on-tax (compound tax), your administrator will configure it; ask before assuming.
• Tax appears on the printed invoice. Make sure the customer understands the tax breakdown, especially if rates vary.

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