Articles on: Invoicing & Payments

Why are there 2 levels of tax?

There are really 2 Taxes that can be applied to the same Country and State.
So, you can set a Tax in level 1, and another one in level 2.

You can also make your Tax level 2 to be compound. This means the Tax will be calculated over the first Tax also. For example, You can have a Tax level 1 of 10%, and a Tax level 2 compound of 20%. So, if the taxes applies to your customer and need to pay lets say $100, then the Tax level 1 value will be $10 (10% calculated over the $100 original price), while the Tax level 2 will be $22 (20% calculated over the $100 original price plus the $10 of the first Tax).

When you set a Tax as VAT, it will not be charged to your customer if they have entered a valid VAT number for their country.

Every Tax Rule applies to a defined Country and State.
You can also set your Tax Rules to apply to a complete Country or to the whole world.
More specific Tax Rules override the more general Tax Rules. For example, lets say you have the following Tax Rules:
- 10% applying to All Countries (and All States)
- 12% applying to United States and All States
- 15 % applying to United States and New York
So, the taxes for a customer will apply depending on his Country and State.
- If he is from New York, then his Tax will be 15%
- If he is from United States but not from New York, then his Tax will be 12%
- If he is not from United States, then his Tax will be 10%

Tax rules will only be taken in count for a customer when all the following conditions are achieved:
- The customer is set as taxable (See his billing details in his profile)
- His product, recurring fee or invoice entry has been set as taxable
- There is a Tax Rule matching the customer Country and State
- The Tax Rule is not set as VAT or the customer is not using a valid VAT number

Updated on: 24/02/2023

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