If you charge sales tax, or VAT on your products, you need to set up the tax rate(s). You can have different rates of tax for different countries, and you can allow exemption from tax for those who can supply their own VAT number or reseller certificate number, or for online orders.

Note: Some countries, eg. Canada, have more than one tax rate to be applied to transactions. nBill will only support a single tax rate per item, but a further tax rate can be simulated by creating a fee record. When using this workaround, although you will be able to charge people the correct amount, and have the correct totals shown on their invoices, the tax amounts will not show up correctly in nBill's reporting features.

Please note that shipping fees can be assigned a different tax rate - or they can be set to pick up the default tax rate from the tax record. To set a different rate for shipping fees, you specify this in the shipping record itself, not here in the tax record. Likewise, you can specify a custom tax rate on an order record, which will override the rates specified here.

Important note regarding sales to customers within the EU

When selling digital goods and services (such as e-Books, software downloads, website hosting, telecommunications, and broadcasting services) to customers within the EU, VAT must be charged at the rate prevailing in the country of the customer, not the seller - even if the seller is not based within the EU. To facilitate this, nBill is able to automatically populate a list of EU tax rates and keep them updated. When you access the main nBill dashboard, if the VAT rates have not been checked in the last 24 hours, nBill will connect to the nbill.co.uk server and check whether any EU tax rates have been updated. If so, it will update the tax records, and if you have any recurring orders set up which are using the updated tax rate, it will prompt you to decide how to proceed (ie. whether to adjust the net or the gross amount for the affected orders).

The EU VAT rates that are populated and updated automatically by nBill are marked as being for electronic delivery ONLY. These rates of tax will NOT be applied to any records UNLESS those records are marked as for electronic delivery. For other products and services (non-digital, or those only on sale to customers outside the EU), you will need to create your own VAT records (if applicable) and keep them up-to-date yourself. A typical setup for companies within the EU is described here.

If you do not sell digital goods or services (check with your local tax authorities as to whether a particular product or service falls within the rules), or you only sell to customers who are outside the EU, or are exempt from collecting VAT for any other reason, you can tell nBill not to bother connecting daily to nbill.co.uk to keep the electronic delivery sales tax records up-to-date by setting 'Check for EU VAT rate changes' to 'no' on the advanced tab of the global configuration page. You could also delete the electronic delivery tax rates from the sales tax (VAT) list if you want to keep things neater, but they won't do any harm there as they will only be used if you have products marked as being for electronic delivery.


To access the list of tax rates, select Configuration­->Sales Tax (VAT) from the main menu as shown in figure 3.4.1.

Figure 3.4.1 - Accessing the Tax Rates


This brings you to the list of tax rates as shown in figure 3.4.2. The first time you use this, a list of tax rates for EU countries will be populated automatically (with the name of the tax given in the local language). These tax rates are only applicable to products marked as for electronic delivery (see important note, above). For other (non-digital) goods and services, you can create your own tax rate records.

Figure 3.4.2 - Sales Tax (VAT) List

 For Example: In the above example, there are 3 tax rates defined (in addition to the auto-populated electronic delivery rates). This would be the typical setup for a UK company. Orders from clients in the UK are subject to a rate of 20%, regardless of whether or not they are VAT­ registered. Orders from clients outside the UK but within the EU are subject to a rate of 20% unless they can provide their own VAT number (or equivalent). Orders from clients outside the EU are exempt of VAT. A similar setup may be required in other EU countries.

 For Example: In the US, there are lots of different tax rates in different states. Because of this, online sales may be exempt from sales tax completely. However, you may wish to record offline sales on nBill, as well as or instead of online sales. In this case, you would need to add a new tax record for each tax rate you deal with.

Click on the 'New' toolbar button, or on a tax item to create or edit a tax record. This takes you to the tax editor which includes the following settings.

Basic Tab

Name of Tax

The full name of the type of tax.

Abbreviation

Most sales tax schemes use an abbreviation (such as VAT, IVA, CIF), which is much more commonly used than the full name. This abbreviation will appear on your invoices.

Country

The country to which this tax applies. As well as individual countries, the dropdown list includes values of 'European Union' and 'Worldwide'.

When an order is created for a client, nBill will first check to see whether there is a tax record for their particular country (nb. this is only after checking for 'tax zones' - see below). If it cannot find one, it checks to see if the client's country is within the EU, and if so, looks for a tax record for the EU. If a tax record is still not found, it checks for a 'Worldwide' record and applies the tax from there.

Whenever the EU countries are checked, the vendor's own country is excluded (because usually the tax rules will be different in your own country than in the rest of the EU).

If you charge VAT on non-digital goods, you should always have at least one tax record for your own country. If you trade outside your own country, you should have a tax record for 'Worldwide' (typically with a tax rate of 0%), and if your country is in the EU and you trade with other countries in the EU, you should have a record for 'European Union'.

Tax Zone

If splitting up tax rates into different countries is not enough for you, you can specify as many individual tax rates as you like, and give each one a 'tax zone'. This is an arbitrary value that is used to identify the tax record and link it with a particular client. If you specify a tax zone, you should also specify the same tax zone in the client records for the clients to which it relates.

Before checking for tax rates in different countries, nBill will first check to see whether the client record has a tax zone assigned to it. If so, and a tax record with a matching tax zone is also found, then that rate of tax is applied to the order.

 For Example: If you are based in the US, and use nBill to record details of offline orders in other states, you would set up tax records for each state that you trade in - and give each record a tax zone value (typically, using the name of the state or municipality as the value for the tax zone field). You would then add the same tax zone value to each client record within that state. This ensures that client gets charged the tax rate for that tax zone.

Tax Reference Description

The description of a VAT number or equivalent, to appear as a label next to the reference number itself on your invoices. For example, you could enter "VAT No." or "Reseller Certificate Number" - whatever describes what the tax reference number actually is.

Rate

The rate of tax that will be applied, expressed as a percentage. Do not include the % symbol. This field supports up to 2 decimal places.

Online Orders Exempt?

Whether or not orders made through the component's front-end are exempt of tax. This is intended for use in the US, where online orders are not usually subject to sales tax. When an administrator creates an order in the back-end, they can specify whether it is an online order or not, and that setting will determine whether this tax rate is applied or not if this value is set to 'yes'.

Exempt With Tax Reference?

Whether or not the tax should be omitted if the client has a tax reference number on their client record. You can allow (or disallow) your clients to specify their own tax reference number in their profile using a client profile field which is mapped to the tax exemption code (a field for this purpose is supplied by default). If Exempt With Tax Reference is set to 'yes', and the client record contains a tax reference number, the tax will not be applied.

This is intended for use within the EU (outside your own country but within the EU, VAT is not applicable if the client has a VAT number or equivalent) or when selling offline, business to business in the US (when a client has their own reseller certificate).

Electronic Delivery Only?

Whether this tax rate should be applied to records marked for electronic delivery. Typically, tax rates for electronic delivery are created and updated automatically, so you shouldn't ever need to change this value. Any new tax records you create yourself would normally have this set to 'no'.

Advanced Tab

Payment Instructions

You can override the default payment instructions that were defined in your vendor record by entering a different value here.

Small print

You can override the default small print that was defined in your vendor record by entering a different value here.