Client Sales Taxes (Revenue)

In specific scenarios, it becomes necessary to apply Sales Taxes to different types of services within your business operations. Sales Taxes are typically applied based on the specific location where the services are provided. To address this, Discovery offers a Location-based Sales Tax assignment method that allows you to include or exclude particular service categories when determining how Sales Taxes are to be applied.

When it comes to Sales Taxes, Discovery takes additional advantage with its integration with your accounting system. Once integration has occurred, Sales Taxes can then be directly linked to specific General Ledger (GL) accounts preexisting within your accounting system. This linkage ensures that Sales Taxes are not only accurately calculated but also properly recorded and routed to the appropriate accounts within your financial system. This level of integration and flexibility within Discovery streamlines your tax management processes and helps ensure compliance with tax regulations while maintaining financial accuracy.

Please see the Quickbooks Online Integration or Quickbooks Desktop Integration documentation on how to integrate Discovery with your accounting system. Although GL Accounts can be set up manually within Discovery, we highly recommend that accounting system integration occur before Sales Taxes are established.

How Do I Set up Client Sales Taxes?

In Discovery, Client Sales Taxes are applied on the Location level. Each Service at that location can then be included/excluded based on rules applied to the Sales Tax record.

Below you'll find an example of how to set up a simple Sales Tax record that can be applied to all Services at a Location.

1
Click on your username in the upper right-hand corner. Select Settings.
2
In the left-hand side menu, select Sales Taxes.
3
Here, you'll find a listing of all Sales Tax records. You have the option to Edit an existing record or create a New one. The options for each are identical. Here we'll choose New.
4
Provide a Name for this Sales Tax record. This will only show within Discovery and will not be included on Client Invoices.
5
Provide a Display Name. This will appear as a line item label on the Client Invoice for each Location that includes a tax line item.
6
Enter a Default Tax Rate. This will always be a numerical percentage.
7
From the GL Account drop-down menu, select from the available options. This is populated from the GL Accounts set up under Accounting Integrations. Here we chose Sales Tax.
8
Click Save.

You'll then need to apply the Sales Tax record to a Location. Please see the How do I apply Client Sales Taxes at a Location? documentation on how to do this.

There are instances where you only want specific Service types at a location to be taxed or taxed at a different rate. Sales Tax record Rate Overrides handle this functionality. We'll demonstrate two scenarios along with corresponding Rate Overrides after we save this Sales Tax record.

Scenario 1

We want only one Service type to be taxed. Here, we'd recommend setting up the default tax rate to be 0%. Then set up a Rate Override a bit later to set the tax rate specifically for the Service type you want taxed.

Setup

1
Click on your username in the upper right-hand corner. Select Settings.
2
In the left-hand side menu, select Sales Taxes.
3
Here, you'll find a listing of all Sales Tax records. You have the option to Edit an existing record or create a New one. The options for each are identical. Here we'll choose New.
4
Provide a Name for this Sales Tax record. This will only show within Discovery and will not be included on Client Invoices.
5
Provide a Display Name. This will appear as a line item label on the Client Invoice for each Location that includes a tax line item.
6
Enter a Default Tax Rate. This will always be a numerical percentage. Enter a default tax rate of 0%.
7
From the GL Account drop-down menu, select from the available options. This is populated from the GL Accounts set up under Accounting Integrations. Since this will only be a tax on Rental type Services, we chose Rental.
8
Click Save.

After saving, you should now see a Rate Override section below the Save button. Here, you see any recorded Rate Overrides.

Again, ensure the default rate is set to 0% if it isn't already. We only want the Service set up in a Rate Override to be taxed above 0%.

9
Create a new Rate Override by clicking on the New Rate Override button.
10
Make a selection from the Line Item Category drop-down. Here, we want to apply a 2% Sales Tax rate to only the Rental Service type. We selected Rental.
11
Enter an Override Default Sales Tax rate.
12
Click on Save.

You'll then need to apply the Sales Tax record to a Location. Please see the How do I apply Client Sales Taxes at a Location? documentation on how to do this.

Scenario 2

We want all Service types to be taxed, but one or more to be taxed at a different rate. Here, we recommend setting the default tax rate for the majority of Service types. Then, set up a Rate Override a bit later to set the tax rate specifically for the Service type(s) you want taxed at a different rate(s).

Setup

1
Click on your username in the upper right-hand corner. Select Settings.
2
In the left-hand side menu, select Sales Taxes.
3
Here, you'll find a listing of all Sales Tax records. You have the option to Edit an existing record or create a New one. The options for each are identical. Here we'll choose New.
4
Provide a Name for this Sales Tax record. This will only show within Discovery and will not be included on Client Invoices.
5
Provide a Display Name. This will appear as a line item label on the Client Invoice for each Location that includes a tax line item.
6
Enter a Default Tax Rate. This will always be a numerical percentage.
7
From the GL Account drop-down menu, select from the available options. This is populated from the GL Accounts set up under Accounting Integrations. Here we chose Sales Tax.
8
Click Save.

After saving, you should now see a Rate Override section below the Save button. Here, you see any recorded Rate Overrides.

Now that the default tax rate is already set for the majority of the Services for the target Location, we want to configure a Rate Override for each Service at the target Location that needs a different Sales Tax rate.

9
Create a new Rate Override by clicking on the New Rate Override button.
10
Make a selection from the Line Item Category drop-down. Here, we want to apply a 1.5% Sales Tax rate to only the Rental Service type. We selected Rental.
11
Enter an Override Default Sales Tax rate.
12
Click on Save.
13
Repeat for additional Rate Overrides

You'll then need to apply the Sales Tax record to a Location. Please see the How do I apply Client Sales Taxes at a Location? documentation on how to do this.

If you have additional questions or need more in depth information, please feel free to send us a message using the help beacon in the lower right-hand corner.