Calculating Tax Rate
The Agile ERP includes an integrated Tax Calculator that complies both with EU and US regulations.
Processing Orders within the EU
Orders inside the EU are subjected to Value Added Tax (VAT). The VAT rate differs per country and is dependent on the location of the printing service.
The default rate can be set up in Service Panel > Settings > General Settings
Processing Orders with other EU countries
If both Service Partner and the foreign customer have a VAT identification number, VAT must be paid in the country where the so-called place of performance is located. In the case of transactions across national borders, the place of performance is shifted to the location of the recipient of the goods.
Therefore, an order will not contain any VAT (0% VAT) if all of the following conditions apply:
The Service Partner is located within the EU
The Shipping Address of the order is in the EU
The Billing Address contains a Company Name
The Billing Address contains a VAT ID
The Country in the Shipping Address is different than the Country of the Printing Service
The Country in the Billing Address is different than the Country of the Printing Service
The Agile ERP will automatically check if VAT is applicable based on each order.
How 3YOURMIND calculates VAT
Consider this example of an order:
What | Net Price | 19% Tax | Gross Price |
|---|---|---|---|
Line 1 | 3,40 € | ? | ? |
Line 2 | 2,40 € | ? | ? |
Total | ? | ? | ? |
To calculate the VAT, there are two legally valid methods of calculating the tax. The vertical and the horizontal method.
Vertical Method to calculating the tax (used by 3YOURMIND)
Calculate the tax for each item individually.
For the total prices, we create the sum for each column individually.
What | Net Price | 19% Tax | Gross Price |
|---|---|---|---|
Line 1 | 3,40 € | 3,40 € * 0,19 ≈ 0,65 € | 3,40 € + 0,65 € = 4,05 € |
Line 2 | 2,40 € | 2,40 € * 0,19 ≈ 0,46 € | 2,40 € + 0,46 € = 2,86 € |
Total | 3,40 € + 2,40 € = 5,80 € | 0,65 € + 0,46 € = 1,11 € | 4,05 € + 2,86 € = 6,91 € |
Benefit:
Each item contains prices with 2 decimal places for net and gross.
For each column the total is the sum of all line prices
Drawback:
The tax on the total seems to be off: (5,00 € * 0,19 = 1,10 € ≠ 1,11 €). This effect increases for high quantities and lower prices. Note, that although the tax seems to be not correct on the total, this method of calculating tax is legal and commonly used.
Horizontal Method to calculating the tax
Calculate the tax for each item individually.
Create the sum for the Gross price only
Use the VAT rate to derive a Total net Price.
What | Net Price | 19% Tax | Gross Price |
|---|---|---|---|
Line 1 | 3,40 € | 3,40 € * 0,19 ≈ 0,65 € | 3,40 € + 0,65 € = 4,05 € |
Line 2 | 2,40 € | 2,40 € * 0,19 ≈ 0,46 € | 2,40 € + 0,46 € = 2,86 € |
Total | 6,91 € - 1,10 € = 5,81 € | 6,91 € *0,19 / 1,19 ≈ 1,10 € | 4,05 € + 2,86 € = 6,91 € |
Benefit:
The tax calculation is correct in the last line.
Drawback:
For the Net prices and tax column, the sum of the line prices are not equal to the total price (when using only 2 decimal digits). (e.g. 3,40 € + 2,40 € = 5,80 € ≠ 5,81 €)
Due to the fact that 3YOURMIND supports showing line prices both in NET and in GROSS for different users, 3YOURMIND uses the vertical method for calculating tax.
Hence the tax calculation may seem off on the first sight.
Processing Orders from the EU to non-EU countries
If the printing service is located inside the EU but the Shipping Address is outside the EU, no VAT will be added (0% VAT).
Printing Services can restrict offering their services to EU countries, by removing those countries from the shipping methods.
Processing Orders from non-EU countries
If the Printing Service is located outside the EU and the Billing Address of buyer is not in the same country as the Printing Service, no VAT will be added (0% VAT). (valid for software >= v3.18.4)
Orders within the US
The calculating tax within the US depends on a wide variety of factors from each state and municipality. The Agile ERP use taxjar.com to calculate appropriate Sales Tax. If you want to check that your tax is calculated correctly, you can use their state tax tool.
You can set individual customers of yours as tax-exempt via the admin panel user profile. Customers who are set to tax-exempt will not be charged US Sales tax when an invoice is created. A more detailed guide on how to set the US tax exempt flag for certain customers can be found here.
