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Tax Rates

The Tax Rate object

Accounting service providers are usually pre-configured with a set of tax rates available in the business' country of operations. A business can modify those tax rates accordingly as well. This makes it easier to apply rates without having to remember them.

Some tax rates are a result of multiple sub-taxes. Railz refers to those as components. For example, a Canadian business in British Colombia is charged a tax rate called "GST/PST tax (12%)" that has two components:

  • A GST tax of 5%.
  • A PST tax of 7%
FieldTypeDescription
id
sortable, filterable		stringIdentifier for the tax rate, unique for the business in the accounting service.
name stringName of the tax rate.
code
sortable, filterable		stringReference code of the tax rate.
effectiveTaxRate
sortable, filterable		decimalSee Effective tax rates.
totalTaxRate
sortable, filterable		decimalTotal (not compounded) sum of the components of a tax rate.
components array An array of tax components.
sourceModifiedDate string
See Date		Date the record was last changed in the accounting system.

Tax Components

FieldTypeDescription
id
sortable, filterable		stringThe Id of the component.
namestringComponent name.
rate
sortable, filterable		decimalComponent rate.
isPurchasesTax
sortable, filterable		booleanSpecifies whether the tax rate can be associated with purchases.
isSalesTax
sortable, filterable		booleanSpecifies whether the tax rate can be associated with sales.
isCompound
sortable, filterable		booleanSpecifies whether the tax rate is compound or not.
See effective tax rates.

Effective Tax Rate

If a tax rate has multiple components, the total tax is calculated based on the sum-product of each rate and the original amount. Alternatively, one can calculate the tax based on the subtotal of the original amount plus another tax, also known as compounding. When compounding is used, the effective tax rate is the rate that, if applied to the original amount, would result in the total amount of the tax with compounding.

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Compounded Tax Rate Example

A sales tax has two components that have a rate of 5% and 7%, and one component is a compound. Assuming an invoice with a total amount of $100, the effective rate can be calculated as follows:

  • GST (5%) = $5
  • Subtotal with GST = $105
  • PST (7%) = $7.35
  • Total = 112.35

In this case, there is a total tax rate of 12% but an effective tax rate of 12.35%.

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For QuickBooks Online, the effective and total rates are the same because the total tax rate is a sum of the component rates.

The Tax Rate Reference Object

Data types that reference a tax rate, for example, invoice and bills, use a taxRateRef that includes the id and name of the linked tax rate.

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Using Tax Rate Reference in Push

For convenience, when pushing data taxeRef can be used alone with the id as a value instead of nesting it within.

When pushing to Xero, use code as a value.