Enter tax-inclusive prices on sales invoices
Tax-inclusive prices already have any applicable tax added to the selling price. The customer sees the total price, including tax, rather than a tax-exclusive selling price with separately added tax. Manager can handle either situation with selection of the same tax code. But tax amounts calculated will, necessarily, be different. (See the Note below.)
By default, unit prices on sales invoices are treated as tax-exclusive.
Pierre charges a customer 1,000 with 10% tax:
Since the amount of 1,000 is tax-exclusive, 10% tax is added to it, increasing the total to 1,100. The tax shows as an addition on the sales invoice:
100.00 is posted to Tax payable. The full 1,000.00 sub-total is posted to the appropriate income account.
You can make unit prices tax-inclusive when creating or editing invoices. The choice applies to the entire sales invoice. Simply check the box:
Pierre previously quoted a single price, including tax, to his customer. So Pierre checks the appropriate box when he creates the sales invoice. The sales invoice changes to show how much tax is included in the 1,000:
90.91 is posted to Tax payable. Only 909.09 is posted to the relevant income account.
The tax and income amounts are both lower for tax-inclusive pricing because Manager calculates what tax-exclusive unit price would have produced the total, tax-inclusive price after tax was added. This calculation is:
Tax-exclusive price = Tax-inclusive price / (1 + Tax rate)
Of course, for standard tax-exclusive pricing, the higher price entered is used directly, resulting in a higher tax amount.