Whole amount and Interval calculation options for sales tax codes
This article explains the options for the Calculation method field on sales tax codes and how sales tax is calculated for intervals and whole amounts.
You can set up a sales tax code to be calculated based on a whole amount or an interval amount. On the Sales tax codes page, use the Calculation method field on the Calculation FastTab to select the calculation method for a sales tax code.
- Whole amount – The tax rate is applied to the whole taxable amount.
- Interval – The taxable amount is divided into parts, each of which falls in a range that has a specific sales tax rate. The part of the amount that falls in a given interval is taxed according to the tax rate for that interval. The sales tax is the sum of the tax amounts that are calculated for each amount interval.
Note
The Interval option is available only when you select Line in the Calculation method field in the Sales tax area of the General ledger parameters page.
Intervals are set up in the Sales tax code values page by entering Minimum and Maximum limit amounts per tax rate. For taxes to be calculated on all taxable amounts, regardless of which calculation method is selected, intervals must follow these rules:
- The first interval must have a Minimum limit of zero.
- The last interval must have a Maximum limit of zero, which indicates infinity.
- The Maximum limit of an interval must be the Minimum limit of the next interval.
If an amount is the Maximum limit of the previous interval and the Minimum limit of the next interval, the sales tax rate of the first interval will be applied to the amount. If an amount falls outside the intervals that are defined by upper and lower limits, a sales tax rate of zero will be applied.
Example: Whole amount method of calculation
In the Sales tax code values page, sales tax rates are set up in the following intervals:
| Minimum limit | Maximum limit | Tax rate |
|---|---|---|
| 0.00 | 50.00 | 30% |
| 50.00 | 100.00 | 20% |
| 100.00 | 0.00 | 10% |
The sales tax is calculated on the whole taxable amount.
| Taxable amount (price) | Calculation | Sales tax |
|---|---|---|
| 35.00 | 35.00 * 0.30 | 10.50 |
| 50.00 | 50.00 * 0.30 | 15.00 |
| 85.00 | 85.00 * 0.20 | 17.00 |
| 305.00 | 305.00 * 0.10 | 30.50 |
Example: Interval method of calculation
In the Values page, sales tax rates are set up in the following intervals:
| Minimum limit | Maximum limit | Tax rate |
|---|---|---|
| 0.00 | 50.00 | 30% |
| 50.00 | 100.00 | 20% |
| 100.00 | 0.00 | 10% |
The sales tax is the sum of the tax amounts that are calculated for each amount interval.
| Taxable amount (price) | Calculation | Sales tax |
|---|---|---|
| 35.00 | 35.00 * 0.30 | 10.50 |
| 50.00 | 50.00 * 0.30 | 15.00 |
| 85.00 | (50.00 * 0.30 = 15.00) + (35.00 * 0.20 = 7.00) | 22.00 |
| 305.00 | (50.00 * 0.30 = 15.00) + (50.00 * 0.20 = 10.00) + (205 * 0.10 = 20.50) | 45.50 |
For more information, see Sales tax rates based on the Marginal base and Calculation methods.