Gotransverse Tax Essentials

With Gotransverse Tax Essentials (also known as External Tax), you can create and manage tax tables and calculate taxes for products and services without the need for a third party tax service.

Terminology

Tax table: a container for storing tax table entries. Tax tables are used when configuring the External Tax processor.

Tax table entry: used for storing parameters for taxations. Each tax table entry is identified by the code which provides a way to link a tax table entry to the needed charge category that is later associated with taxable products. Also, tax table entry includes all details about the tax, meaning tax rate, type, level, and other parameters.

Account category: used to sort billing accounts by geographic location and type of account, control the terms of payment on a billing account basis, and restrict access to billing accounts or any other category that is appropriate for the needs of your company.

Charge category: provides a way to categorize prices and revenues. For example, you can group your prices and revenues by product or type of service for reporting purposes.

Bill cycle: used to view and define periods during which the usage information is collected to calculate the bill for a customer.

Tax Essentials Setup

To configure External taxes in Gotransverse, first, you need to:

  1. Configure system parameters.
  2. Add tax tables and tax table entries.
  3. Add charge categories.
  4. Configure the External Tax processor.
  5. Calculate taxes.

Configuring system parameters

To configure the tax service, you may want to set up related system settings. For example, you can select whether to use Billing or Service address for tax calculations or if you want to calculate taxes during an order.

To configure the system settings, in the Gotransverse user interface 1.0, go to Admin > Company > System Settings.

Note: For more information about system settings and the possible values, see the System Settings Reference page.

  • Mandatory Billing Address
  • Mandatory Service Address
  • Determines whether to use Billing or Service address for tax calculations
  • Calculate Tax During Order
  • Show save draft order
  • Tax Rounding Correction
  • Product Taxation Mode

For more information about the Tax Inclusive functionality and balancing rounded and nonrounded tax amounts, refer to Inclusive Taxes and Tax Rounding.

Tax Rounding for Inclusive and Exclusive Taxes

Due to multiple calculations with a fraction of a cent rounded to the nearest cent (the unit of money depends on the currency), the total rounded and nonrounded amounts of taxes may slightly differ. Tax Rounding Correction makes adjustments to invoice taxes for any rounding errors that accumulate by tax charge category. To enable tax rounding, set the Tax Rounding Correction system parameter to True.

The Tax Essentials tax processor supports tax rounding for both inclusive and exclusive taxation modes. Taxation mode is defined by the Product Taxation Mode system parameter:

  • When set to INCLUSIVE, taxes are included in the product price.
  • When set to EXCLUSIVE, taxes are added on top of the specified product price.

Below are examples of tax rounding for both inclusive and exclusive tax calculations for a product priced at $105.66 (the unit of money depends on the currencty) with an 8.25% tax rate.

Inclusive Taxes

If you set the Product Taxation Mode system parameter to INCLUSIVE prior to generating an invoice, taxes are included as part of the defined product price. The invoice item charges display the details about the base product price and taxes included in the price.

The tax charges when rounded to 5 decimals, subtotaled by tax charge category, then rounded to two decimals, must equal the sum of the tax charges when rounded to 2 decimals and subtotaled by tax charge category. If they do not balance, a tax adjustment is made for the appropriate tax charge category and offset against the base charge. The price charge category associated with this offset is the charge category with the highest base total.

Note: If there are two charge categories with the same highest base total, the adjustment is made to the charge category of the base amount that has the highest invoice item charge ID.

For example, if a customer orders three of a product with the same tax charge category priced at $105.66 (the unit of money depends of the selected currency), and the Tax Essentials tax processor is configured for 8.25% tax, the tax on this product calculates to $8.05 when rounded to two decimals and to $8,05261 when rounded to five decimals. The tax total for the two and five rounded amounts differs:

  • Total two decimal rounded tax—$24.15 (8.05 * 3)
  • Total five decimal rounded tax—$24.15783 (8.05261 * 3)

Since the five decimal total, when rounded to two decimals is $24.16, the invoice is one cent short on taxes. The Rounding Adjustment for 0.01 cent is added to the tax amount on the invoice to ensure the two decimal amount balances to the five decimal tax total per charge category when rounded to two decimals. An offset is made against the base amount so that the invoice total doesn’t change.

You can find the base charge of a price as the base-charge item. In our example, it is $97.61 for one product priced at $105.66.

Refer to the following invoice example.

Invoice sample

[
{
"invoice_type": "standard",
"id": "874272",
"amount": 316.98,
"status": "OPEN",
"invoice_num": "Dpref6318",
"external_invoice_num": null,
"billing_account": {
	"id": "1513506",
	"account_num": "Dpref3522",
	"external_account_num": null
},
"occurred_on": "2020-04-11T00:00:00-05:00",
"due_date": "2020-04-11",
"amount_to_pay": 316.98,
"late_fee_charged": false,
"invoice_items": [
{
	"invoice_item_type": "product",
	"id": "16215862",
	"quantity": 1.00000,
	"description": "taxable one-time #3",
	"taxable": true,
	"unit_amount": 105.66,
	"total_amount": 105.66,
	"charges": [
	{
		"invoice_item_charge_type": "charge",
		"id": "17622106",
		"amount": 105.66,
		"balance": 105.66,
		"paid": false,
		"details": [
		{
			"charge_detail_type": "tax-charge",
			"id": "12814",
			"amount": 8.05,
			"charge_detail_type": "tax-charge",
			"tax_description": "Some description",
			"tax_code": "TaxCode",
			"tax_level": "MATCH_ALL",
			"tax_rate": 0.08250,
			"jurisdiction_name": "Local",
			"tax_price_category": {
				"charge_category_type": "tax",
				"id": "3202",
				"name": "Tax",
				"description": "Default",
				"priority": 2,
				"status": "ACTIVE"
			}
		},
	{
	"charge_detail_type": "base-charge",
	"id": "12816",
	"amount": 97.61,
	"charge_detail_type": "base-charge"
	}
	],
	"un_prorated_amount": 105.66000,
	"price_category": {
		"charge_category_type": "price",
		"id": "6616",
		"name": "Sample for Tax Price Charge Category #1"
	},
	"description": "Sample for Tax Price Charge Category #1",
	"exclude_from_taxation": false,
	"quantity": 1.00000,
	"tax_inclusive": true
}
],
"start_date": "2020-04-10T00:00:00-05:00",
"end_date": "2020-04-10T00:00:00-05:00"
},
{
"invoice_item_type": "product",
"id": "16215864",
"quantity": 1.00000,
"description": "Taxable product #2",
"taxable": true,
"unit_amount": 105.66,
"total_amount": 105.66,
"charges": [
{
	"invoice_item_charge_type": "charge",
	"id": "17622108",
	"amount": 105.66,
	"balance": 105.66,
	"paid": false,
	details": [
	{
		"charge_detail_type": "tax-charge",
		"id": "12818",
		"amount": 8.05,
		"charge_detail_type": "tax-charge",
		"tax_description": "Some description",
		"tax_code": "TaxCode",
		"tax_level": "MATCH_ALL",
		"tax_rate": 0.08250,
		"jurisdiction_name": "Local",
		"tax_price_category": {
			"charge_category_type": "tax",
			"id": "3202",
			"name": "Tax",
			"description": "Default",
			"priority": 2,
			"status": "ACTIVE"
		}
	},
	{
	"charge_detail_type": "base-charge",
	"id": "12820",
	"amount": 97.61,
	"charge_detail_type": "base-charge"
}
],
"un_prorated_amount": 105.66000,
"price_category": {
	"charge_category_type": "price",
	"id": "6616",
	"name": "Sample for Tax Price Charge Category #1"
},
"description": "Sample for Tax Price Charge Category #1",
"exclude_from_taxation": false,
"quantity": 1.00000,
"tax_inclusive": true
}
],
"start_date": "2020-04-10T00:00:00-05:00",
"end_date": "2020-04-10T00:00:00-05:00"
},
{
"invoice_item_type": "product",
"id": "16215866",
"quantity": 1.00000,
"description": "Taxable one-time",
"taxable": true,
"unit_amount": 105.66,
"total_amount": 105.66,
"charges": [
{
	"invoice_item_charge_type": "charge",
	"id": "17622110",
	"amount": 105.66,
	"balance": 105.66,
	"paid": false,
	"details": [
	{
		"charge_detail_type": "tax-charge",
		"id": "12822",
		"amount": 8.05,
		"charge_detail_type": "tax-charge",
		"tax_description": "Some description",
		"tax_code": "TaxCode",
		"tax_level": "MATCH_ALL",
		"tax_rate": 0.08250,
		"jurisdiction_name": "Local",
		"tax_price_category": {
			"charge_category_type": "tax",
			"id": "3202",
			"name": "Tax",
			"description": "Default",
			"priority": 2,
			"status": "ACTIVE"
		}
	},
	{
	"charge_detail_type": "base-charge",
	"id": "12824",
	"amount": 97.61,
	"charge_detail_type": "base-charge"
	}
	],
"un_prorated_amount": 105.66000,
"price_category": {
	"charge_category_type": "price",
	"id": "6616",
	"name": "Sample for Tax Price Charge Category #1"
},
"description": "Sample for Tax Price Charge Category #1",
"exclude_from_taxation": false,
"quantity": 1.00000,
"tax_inclusive": true
}
],
"start_date": "2020-04-10T00:00:00-05:00",
"end_date": "2020-04-10T00:00:00-05:00"
},
{
"invoice_item_type": "tax",
"id": "16215868",
"quantity": 1.00000,
"description": "Tax Offset",
"taxable": true,
"unit_amount": 0.00,
"total_amount": 0.00,
"charges": [{
	"charge_detail_type": "base-charge",
	"id": "12826",
	"amount": -0.01,
	"charge_detail_type": "base-charge"
},
{
"invoice_item_charge_type": "tax",
"id": "17622112",
"amount": 0.00,
"balance": 0.00,
"paid": true,
"details": [
{
	"charge_detail_type": "tax-charge",
	"id": "12828",
	"amount": 0.01,
	"charge_detail_type": "tax-charge",
	"tax_price_category": {
		"charge_category_type": "tax",
		"id": "3202",
		"name": "Tax",
		"description": "Default",
		"priority": 2,
		"status": "ACTIVE"
	}
}
],
"price_category": {
	"charge_category_type": "tax",
	"id": "3202",
	"name": "Tax"
},
"description": "Tax",
"exclude_from_taxation": false,
"quantity": 1.00000,
"tax_inclusive": true,
"tax_category_id": 0
}
]
}
],
"billing_statement": {
	"statement_type": "statement",
	"balance": 3134.32,
	"id": "677428",
	"total_amount": 3451.30,
	"service_charges": 316.98,
	"activity_charges": 0.00,
	"other_charges_and_credits": 0.00,
	"taxes_and_fees": 0.00,
	"total_current_charges": 316.98,
	"total_tax_inclusive_amount": 24.16,
	"payment_received_amount": 0.00,
	"payment_canceled_amount": 0.00,
	"credit_adjustments_posted_amount": 0.00,
	"credit_adjustments_write_off_amount": 0.00
},
"auto_payment_date": "2020-04-11",
"disputed": false,
"bill_cycle": {
	"bill_cycle_type": "daily",
	"id": "31476",
	"name": "sample-for-tax"
}
}
]

Exclusive Taxes

If you set the Product Taxation Mode system parameter to EXCLUSIVE prior to generating an invoice, taxes are excluded from the defined product price. When the Tax Rounding Correction system setting is set to True prior to generating an invoice, the tax charges, when rounded to 5 decimals, subtotaled by tax charge category, and then rounded to two decimals, must equal the sum of the tax charges when rounded to 2 decimals and subtotaled by the tax charge category. If they do not balance, a tax adjustment is made for the appropriate tax charge category.

For example, if a customer orders two of a product priced at $105.66 (the unit of money depends on the selected currency), and the Tax Essentials tax processor is configured for 8.25% tax, the tax on this product calculates to $8.72 when rounded to two decimals and $8.71695 when rounded to five decimals. The tax total for rounded and unrounded amounts differs:

  • Total two decimal rounded tax—$17.44 (8.72 * 2)
  • Total five decimal rounded tax—$17.4339 (8.71695 * 2)

Since the five decimal rounded tax total, when rounded to two decimals, is $17.43, the invoice tax amount is overstated by $0.01. To balance, the system adds an additional invoice item of -$0.01 with the description of ‘Tax Rounding’, giving the invoice a new total of $228.75:

  • Total product charges—$211.32
  • Total tax charges—$17.43

Refer to the following invoice example.

Invoice sample

[
{
"invoice_type": "standard",
"id": "874218",
"amount": 228.75,
"status": "OPEN",
"invoice_num": "Dpref6314",
"external_invoice_num": null,
"billing_account": {
	"id": "1513506",
	"account_num": "Dpref3522",
	"external_account_num": null
},
"occurred_on": "2020-04-07T00:00:00-05:00",
"due_date": "2020-04-07",
"amount_to_pay": 228.75,
"late_fee_charged": false,
"invoice_items": [
{
	"invoice_item_type": "product",
	"id": "16215790",
	"quantity": 1.00000,
	"description": "Taxable one-time",
	"taxable": true,
	"unit_amount": 114.38,
	"total_amount": 114.38,
	"charges": [
	{
		"invoice_item_charge_type": "charge",
		"id": "17622022",
		"amount": 105.66,
		"balance": 105.66,
		"paid": false,
		"details": [],
		"un_prorated_amount": 105.66000,
		"price_category": {
			"charge_category_type": "price",
			"id": "6616",
			name": "Sample for Tax Price Charge Category #1"
		},
		"description": "Sample for Tax Price Charge Category #1",
		"exclude_from_taxation": false,
		"quantity": 1.00000,
		"tax_inclusive": false
	},
	{
	"invoice_item_charge_type": "tax",
	"id": "17622026",
	"amount": 8.72,
	"balance": 8.72,
	"paid": false,
	"details": [],
	"price_category": {
		"charge_category_type": "tax",
		"id": "3202",
		"name": "Tax"
	},
	"description": "Local",
	"exclude_from_taxation": false,
	"quantity": 1.00000,
	"tax_inclusive": false,
	"tax_category_id": 0,
	"tax_description": "Some description",
	"tax_code": "TaxCode",
	"tax_level": "MATCH_ALL",
	"tax_rate": 0.08250,
	"jurisdiction_name": "Local"
}
],
"start_date": "2020-04-06T00:00:00-05:00",
"end_date": "2020-04-06T00:00:00-05:00"
},
{
"invoice_item_type": "product",
"id": "16215792",
"quantity": 1.00000,
"description": "Taxable product #2",
"taxable": true,
"unit_amount": 114.38,
"total_amount": 114.38,
"charges": [
{
	"invoice_item_charge_type": "charge",
	"id": "17622024",
	"amount": 105.66,
	"balance": 105.66,
	"paid": false,
	"details": [],
	"un_prorated_amount": 105.66000,
	"price_category": {
		"charge_category_type": "price",
		"id": "6616",
		"name": "Sample for Tax Price Charge Category #1"
	},
	"description": "Sample for Tax Price Charge Category #1",
	"exclude_from_taxation": false,
	"quantity": 1.00000,
	"tax_inclusive": false
	},
	{
	"invoice_item_charge_type": "tax",
	"id": "17622028",
	"amount": 8.72,
	"balance": 8.72,
	"paid": false,
	"details": [],
	"price_category": {
		"charge_category_type": "tax",
		"id": "3202",
		"name": "Tax"
	},
	"description": "Local",
	"exclude_from_taxation": false,
	"quantity": 1.00000,
	"tax_inclusive": false,
	"tax_category_id": 0,
	"tax_description": "Some description",
	"tax_code": "TaxCode",
	"tax_level": "MATCH_ALL",
	"tax_rate": 0.08250,
	"jurisdiction_name": "Local"
}
],
"start_date": "2020-04-06T00:00:00-05:00",
"end_date": "2020-04-06T00:00:00-05:00"
},
{
"invoice_item_type": "tax",
"id": "16215794",
"quantity": 1.00000,
"description": "Tax Rounding",
"taxable": true,
"unit_amount": -0.01,
"total_amount": -0.01,
"charges": [
{
	"invoice_item_charge_type": "tax",
	"id": "17622030",
	"amount": -0.01,
	"balance": -0.01,
	"paid": true,
	"details": [],
	"price_category": {
		"charge_category_type": "tax",
		"id": "3202",
		"name": "Tax"
	},
	"description": "Tax",
	"exclude_from_taxation": false,
	"quantity": 1.00000,
	"tax_inclusive": false,
	"tax_category_id": 0
}
]
}
],
"billing_statement": {
	"statement_type": "statement",
	"balance": 2173.15,
	"id": "677394",
	"total_amount": 2401.90,
	"service_charges": 211.32,
	"activity_charges": 0.00,
	"other_charges_and_credits": 0.00,
	"taxes_and_fees": 17.43,
	"total_current_charges": 228.75,
	"payment_received_amount": 0.00,
	"payment_canceled_amount": 0.00,
	"credit_adjustments_posted_amount": 0.00,
	"credit_adjustments_write_off_amount": 0.00
},
"auto_payment_date": "2020-04-07",
"disputed": false,
"bill_cycle": {
	"bill_cycle_type": "daily",
	"id": "31476",
	"name": "sample-for-tax"
}
}
]