- 1 Setting up Tax Rules
- 2 Inclusive/Exclusive Tax
- 3 Tax Calculation Method
- 4 Deduct Tax Amount
- 5 Setting Taxed Items
- 6 Compound Tax
- 7 Showing your Tax ID/VAT Number on Invoices
- 8 Setting Clients as Tax Exempt
- 9 Automatic VAT Number Validation
- 10 Changing the Tax Rate
- 11 Common Problems
Setting up Tax Rules
In order to charge tax, you must first enable Tax charges in WHMCS. To do this, go to Setup > Payments > Tax Rules and then tick the checkbox at the top of the page labelled Tax Enabled and click Save Changes. Tax is now enabled in WHMCS. Now, you can proceed to setup your tax zones. This is done as follows:
- Click the Add New Tax Rule tab on the Tax Setup page
- In the Name field, enter a name for the tax zone which allows you to identify it
- Next, for the Country, choose where this tax rate applies to all countries or whether it only applies to a selected country
- For the state, again you can choose whether it applies to all states in the selected country or only a selected state
- Finally, enter the tax rate as a percentage, for example 17.5 and then click the Save Changes button
For example, if you were a UK business you would setup the system to charge VAT. In the country field, you would choose "United Kingdom" and for the state you would leave it set at "Apply Rule to All States". You would then enter the tax rate of "20.0" and click the Save Changes button. You can setup an unlimited number of tax rules.
By default, tax is exclusive. What this means is that the prices you enter into WHMCS need to have tax added onto them at the rates you've set. The alternative is inclusive tax. Oppositely, this means that the prices you enter into WHMCS already have tax included in them and WHMCS needs to work backwards to calculate the amount of tax being charged based on the rates you've set. You can choose the tax method you want to use in Setup > Payments > Tax Rules.
- Exclusive Tax > Tax Amount = Item Price x ( Tax Rate / 100 )
- Inclusive Tax > Tax Amount = ( Item Price / ( 100 + Tax Rate ) ) x Tax Rate
Tax Calculation Method
The Tax Calculation Method setting determines how taxes are calculated.
The two possible values for this setting are as follows:
- Calculate individually per line item - Selecting this option will calculate taxes on a per line item basis. When selected, tax will be calculated for each line item, rounded to 2 decimal places, and the total tax calculated by taking the sum of the tax calculation for each individual line item.Example Tax Calculation for 4 Line Items of $1 each: (1.00 x 20%) + (1.00 x 20%) + (1.00 x 20%) + (1.00 x 20%) = 0.80
- Calculate based on collective sum of the taxable line items - Selecting this option will calculate taxes using the sum of the line items that are set as taxable on an invoice. When selected, the individual line items marked as taxable will be totalled, and tax calculated based on the sum total of those taxable line items.Example Tax Calculation for 4 Line Items of $1 each: (4.00 x 20%) = 0.80
Deduct Tax Amount
If the Tax Type is set to Inclusive and the client's country and State/Province selections result in them not meeting any of the tax rules configured, deduct an amount from the order based on the total amount of the taxable items on the order and the percentage of tax that would apply to the default country set under Setup > General Settings > Localisation tab. It will deduct the percentage that applies to the first applicable Level 1 and Level 2 tax rules.
Setting Taxed Items
The flexible tax system in WHMCS allows you to set individually which items apply for tax. By default in WHMCS, a product is set to not be taxed. What this means is that even though you have tax rules setup, no tax would be charged for it. So for example you might charge tax on the products you offer but not on services.
Setting a Product/Service as Taxable
- Go to Setup > Products/Services > Products/Services
- Click the edit icon next to the product you wish to set to be taxable
- Tick the checkbox next to the item labelled "Tax Product"
- Save your changes to the product
Setting Domains as Taxable
You can set if tax should be applied to domains in Setup > Payments > Tax Rules - there is a tick box at the top of the page for this.
Setting Billable Items as Taxable
By ticking this option you can set billable items to be taxed under Setup > Payments > Tax Rules.
Setting Late Fees as Taxable
You can set if late fees on invoices should be taxed also in Setup > Payments > Tax Rules.
Setting Custom Invoices as Taxable
With this option ticked one-time custom invoices (ie. those not tied to a product or addon) will have tax applied.
A compound tax is one that is calculated after and on top of a primary tax. If you require the Level 2 tax to be added on top of the Level 1 tax, tick this option.
Showing your Tax ID/VAT Number on Invoices
When charging your customers tax, it is often a requirement for you to display your companies Tax or VAT Number on all invoices. To do this in WHMCS, simply add a line to the bottom of your company address in the General Settings page containing the number - eg. VAT Number XXXXXXXX
Setting Clients as Tax Exempt
You may have clients where you don't want to charge any tax. If this is the case, you need to set them as Tax Exempt. This is done by ticking the tax exempt checkbox on the clients profile page in the admin area.
Automatic VAT Number Validation
WHMCS can be setup to check the VAT number a user supplies during the order process - to validate it and automatically set tax exempt status for the client. To use this feature, you'll need to setup a custom field in Setup > Custom Client Fields as demonstrated below and then activate & configure the Official EU VAT Addon Module per these instructions: http://docs.whmcs.com/EU_VAT_Addon
Changing the Tax Rate
From time-to-time governments change the sales tax rates, this is significant as you must also update your rates accordingly. Instructions for changing the tax rate in WHMCS can be found in our How To Guides.
Tax Not Applied to Invoices
If tax is not being applied to an invoice to which it should this indicates tax rules are not configured correctly or the client does not meet them. Troubleshooting steps are available on the Invoicing Issues page.