How Compound Taxes are Applied

Compound taxes are taxes added to other tax rates when they are applied, not on the original selling price itself.  

The Compound taxes are calculated in the following order:

Example:  You have configured a Tax Schedule with 3 Tax Rates.

Tax Rate 1 - Regular

Range #1

$.01 - $10.00

1%

Range #2

$10.01 - $200.00

5%

Range #3

$200.01 - No limit

10%

 

Tax Rate 2 - Regular

Range #1

$.01 - $20.00

3.5%

Range #2

$20.01 - $200.00

7.5%

Range #3

$200.01 - No limit

11.5%

 

Tax Rate 3 - Compound

Range #1

$.01 - $20.00

0%

Range #2

$20.01 - $200.00

15%

 

 

 

 

Each regular range tax is calculated and applied and then the compound tax is applied to the new total. For example:

1.

Determine the parts (or labor) total on the order.

$150.00

 

2.

Calculate Regular Table 1 tax

$150.00 * 5%

=  $7.50

3.

Calculate Regular Table 2 tax

$150.00 * 7.5%

=  $11.25

4.

Add table 1 tax and table 2 tax to the Parts total

$150.00 + $7.5 +$11.25

= $168.75

5.

Calculate Compound Table 3 tax

$168.75 * 15%

=  $25.31

6.

Add Parts total and all taxes to determine the final parts total.

$150.00 + $7.5 +$11.25 + $25.31

or

$168.75 + $25.31

 

 

=  $194.06