How are Taxes calculate in Zomentum?

Zomentum calculates tax while adding the products in a document. The taxes on these products are determined by two factors: 

  1. Tax jurisdiction (location) of your customer and your business
  2. The product or services you are selling to your customer. 

Depending upon the above two a product or service you are selling can have a standard VAT (or Sales Tax), multiple lower rates, and few products or services that can be exempted from Tax.


Since it wouldn't be possible for Zomentum to constantly update the taxation rules and rates in 1000s of tax jurisdictions, we allow you to configure your Tax rates. To start configuring Taxes in Zomentum, you would need to define below two items:

  1. Tax Regions: A tax region identifies the tax jurisdiction where the same tax rates apply to the same billing items. Tax regions can encompass entire countries, per state, per province, or per municipality. You would need to add a separate tax region for each tax jurisdiction you are selling in.
    • In Canada, the same tax rates apply in an entire province. If you are a Canadian business selling into multiple provinces, you will want to set up a separate tax region for each province.
    • In the United States, sales tax is assessed by most of the states, many counties, and even some municipalities.
  2. Tax Category: Add all the different categories of products and services that occur in your tax jurisdictions. For e.g.: Hardware, Services, Labor, etc.


Setting up Tax Regions

  1. Navigate to Settings -> Tax Setup
  2. Click on Add Region
  3. Enter the name of the Region
  4. Choose if you want to make this region as default. For all the new clients you add in Zomentum, we will add it to the Default region unless changed 
  5. Make sure to enter all the regions you will sell your products and services in 


Setting up Tax categories

  1. Navigate to Settings -> Tax Setup
  2. Switch to Tax Category tab
  3. Click on Add Category
  4. Enter the Category Name
  5. Enter the Tax Code
  6. [Optional] Select the default product types.
  7. Enter the tax rates against each region. If there are multiple tax levels under each region you can add multiple tax levels.
  8. Once entered all the values, click Save


Example
Consider you are selling Hardware to a customer in Orange county of NY. New York state charges 4% sales tax, and Orange County charges 3.375% for a total of 7.375%. In this case, you would set up:
1. A Tax region called "NY - Orange County"
2. Add Tax Category called "Hardware"
3. Add 2 tax level - NY State tax (4%) and Orange county tax (3.375%)


TIP
It is possible to create one tax region for multiple tax jurisdictions. If you sell into multiple states you do not have a presence in and are therefore not required to collect sales taxes, you could set up a sales region called Out of State and apply it to all customers that are located outside of your own state.


Key things to remember

  • After adding a new tax region, come to the tax category and assign the tax rates for the new region under each category
  • By default, any new tax region added will have 0% as tax rates for all the tax category