This article applies to Practice Ignition accounts using our new tax system. To identify if your account is using the new system, visit "Settings" and then "Taxes". If you can see the "Add new tax" option, as in the screenshot below, you're using the new tax system. Otherwise, refer to this support article instead.
Introduction to tax in Practice Ignition
Depending on your location, you may need to charge sales or other taxes when providing services to your clients. This article will help you get tax rates set up correctly in your Practice Ignition account.
If your business does not need to charge tax, then you can can skip the content below.
Setting up your tax rates
First, visit "Settings" and then click on "Taxes". On this page you can:
- Set up tax rates to use in your account
- Choose a default tax rate
- Configure how tax amounts are displayed to your clients
Adding a tax rate
If you are located in Australia, New Zealand, South Africa or the UK then we will have already created a local sales tax rate for you, which you should see here.
If you need to add one or more additional tax rates you can do so by clicking "Add New Tax" within the "Tax Rates" section.
Note that you don't need to add all tax rates that may be applicable to your business, just those that you may need to use when quoting or invoicing your clients.
Renaming or removing a tax rate
It's currently not possible to rename or remove tax rates after they're added to your account. Make sure to only add tax rates that you're going to use when invoicing clients, as this will make it easier to manage tax rates in your Practice Ignition account.
Setting your account-wide default tax rate
Next, choose a default tax rate for your account. This should be the tax rate that you'll most commonly use.
When you add new services to Practice Ignition, they will use this tax rate by default.
Controlling how tax is displayed to clients
There are two settings which control how tax is displayed to your clients - "Sales Tax Display" and "Sales Tax Label".
Quoting prices as tax-inclusive or tax-exclusive
Use "Sales Tax Display" to control whether you want to quote prices to your clients including or excluding tax.
It's also possible to choose "No Tax Display" - in which case your client won't see any indication of whether prices are tax-inclusive or tax-exclusive.
Here's a quick example of how tax-inclusive prices are displayed on a proposal:
And here's an example of a proposal showing tax-exclusive prices:
Note: When you are setting your prices, you will need to enter in the price exclusive of tax at both the service level and proposal level.
This means that if you want to display tax-inclusive prices, you will need to pre-calculate the amount to the nearest decimal point.
Choosing a sales tax label
You may also want to customize the way taxes are described to clients, depending on your location. For example, in the UK you may want to use "VAT" or in Australia "GST".
This can be done by choosing your own Sales Tax Label. As an example, if we set the sales tax label to "VAT", then the client will see prices presented like this on their proposal:
Linking your accounting ledger tax rates to Practice Ignition
When you connect Xero or QuickBooks Online to Practice Ignition, you'll need to map tax rates in the accounting ledger to tax rates in Practice Ignition. This allows Practice Ignition to apply the correct tax rates when invoices are created in your ledger.
You'll only have to map tax rates that have been added in Practice Ignition, not all the rates in the ledger.
Connecting a new accounting ledger
When you connect a new Xero or QuickBooks Online account, you must supply a tax mapping for each tax rate in Practice Ignition.
To connect a new ledger account, go to Apps in the left hand menu and click on the Xero or QuickBooks tile. For more detailed instructions, refer to one of these articles:
Altering the tax rate mapping for an existing connected ledger
Normally your tax rate mapping won't need adjustment once it's been made. However if you do need to alter it, you can do so by going to Apps in the left hand menu. Click on the tile for your connected ledger, and then go to "Tax Rate Mappings" under "App Settings".
Controlling which tax rates are used
This section applies to all customers except those who have connected a US QuickBooks Online account to Practice Ignition. If that's you, skip down to the section below specifically for US QuickBooks Online users.
In Practice Ignition, tax rates are linked to services. When you add services to a proposal, the tax rate linked to each service will be automatically selected. You can change to a different rate within the proposal if you need to.
Choosing a default tax rate for services
Your services will inherit the account-wide default tax rate that you choose on the tax settings page (see above). You should only need to modify services that won't be using your account-wide default rate.
To customize the tax rate used for a service, go to "Library" in the left hand menu. Open the service you'd like to alter. Under "Tax Rate", you can select the rate to use for this service.
Customizing tax rates in a proposal
When you add a service to a proposal, the tax rate linked to the service will be selected automatically. However, you can change the rate used within the proposal if you wish. Just select another rate from the "Tax Rate" drop-down menu (shown in the example below).
Controlling which tax rates are used - QuickBooks Online US users
When using a US QuickBooks Online account with Practice Ignition, you'll choose an overall tax rate for each proposal you create. You can then choose which services within the proposal are tax exempt.
Setting the default tax exempt status for each service
You can set a default tax exempt status that will be automatically selected when you add a service to a proposal. Go to "Library" in the left hand menu and open up the service you'd like to alter. Set the "Tax Exempt" toggle switch on or off and save the service.
Changing this setting won't affect any existing proposals.
Choosing a proposal tax rate
When you create a new proposal, you'll be able to select a tax rate on the "General" tab in the "Tax" section. This rate will apply to all non-exempt services you add to the proposal.
Choosing the tax exempt status of services within a proposal
For each service you add to the proposal, you can choose the tax exempt status. Use the "Tax Exempt" toggle switch beneath the price to change the status.