Overview.
When monetizing a business directory through the sale of listing membership plans it's important to include taxes in the price of these plans to ensure tax compliance and avoid potential legal issues. phpListings provides a solution for administrators to manage taxes for their directory by offering support for various types of tax rates, such as inclusive, exclusive, regional, and compound.
Tax rates can be managed under "Administrator - Settings - Tax Rates".
Inclusive / Exclusive Tax Rates.
Inclusive tax rates include the tax amount in the total amount charged to customers. This means that the tax amount is already included in the price that customers pay. For example, if the product price is $50 and the inclusive tax is 20%, the invoice total will be $50 and the tax of $10 will be deducted from the product price.
On the other hand, exclusive tax rates add the tax amount to the subtotal of the listing invoice. This means that the tax amount is added on top of the price that customers pay. For example, if your product price is $50 and the tax value is 20% the invoice total will be $60 because we add the tax amount of $10 to the product price.
This tax type can be set globally under "Administrator - Settings - Settings - Billing - Tax Type".
Compound Tax Rates.
A compound tax, also known as a cascading tax, is a type of tax that is calculated on top of another tax. In the case of phpListings, if a tax rate is set as compound, it will be applied to the invoice total amount, including any previously calculated tax amounts.
For example, let's say the subtotal for an invoice is $100, and a VAT tax rate of 20% is applied, which brings the total to $120. If a compound tax rate of 10% is also applied, the tax amount will be calculated based on the new total of $120, not the original subtotal of $100.
To calculate the total tax for this example, you would take the initial subtotal ($100) multiplied by the VAT tax rate (20%) to get $20. Then, you would take the new total ($120) multiplied by the compound tax rate (10%) to get $12. Finally, you would add these two amounts together to get a total tax of $32.
In summary, a compound tax rate is applied to the total amount, including any previously calculated tax amounts, and is calculated on top of those taxes.
Regional Tax Rates.
Regional tax rates are an important consideration when managing taxes in a nationwide or international business directory. phpListings allows administrators to link tax rates to specific user locations, which helps ensure that regional tax rates are accurately applied. When adding a tax rate, administrators can select a location for that tax to be applied to. The user profile location setting is considered to be the actual user location for taxing purposes.
Note that if there are separate tax rates set for a state and a city located within that state, only the city tax rate will be applied because of higher priority.
Global tax rates (rates with no location selected) are applied to all locations.
Tax Exempt Users.
phpListings also allows administrators to control tax exemptions for specific users. This feature is important for businesses that may be tax-exempt, such as non-profit organizations.
To enable tax exemptions for a user, administrators can simply enable the "Tax Exempt" setting for that user's account under "Administrator - Users - Users". When this setting is enabled, all tax rates for that user's account will be disabled, ensuring that they will not be charged any taxes when making a purchase.