Asset Intelligence and Management

Asset Intelligence and Management

EZRentOut Blogs Item Level Taxes

Item Level Taxes in EZRentOut

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Our new feature allows you more flexibility while applying taxes to your order. Instead of applying taxes to the entire Order, you can now apply individual taxes to each line item within the Order.

There are several benefits to this feature. For example, let’s say you’re renting out an order that includes heavy machinery as well as some consumable items. A special tax has to be applied only to the heavy machinery. In such cases, you can apply a tax to the individual item instead of the entire order.

Similarly, companies might find themselves in a situation where GST is applicable to a single item only, but PST is applicable to the entire order. In such cases, use line item taxes to assign GST to the individual item.

To further understand line item taxes in EZRentOut, let’s dive deeper!

Enable the feature

To apply taxes on individual items, go to Settings → Company Settings → Tax Details and select the checkbox for ‘Apply tax per individual item’:

The checkbox ‘Line Item-level taxes’ is selected, then the taxes are applied to individual items within the Order.

Selecting the ‘Order-level taxes’ option, then the taxes will only be applied on an Order level. This means that the Order total will be taxed.

Apply tax to items

Apply tax to individual items (Assets, Asset Stock and Inventory). Go to Items → Assets → Choose a particular Asset. From the Asset Details page, click on ‘Edit’ and scroll down to the Taxation section. Here, you can choose which taxes you want to apply to the Asset. The tax for that Asset will now be automatically applied every time that Asset is added to any Order.

The ‘Available Taxes’ are the ones you can choose from to apply to the item. These taxes are not automatically applied to every new Order, and will only be applied to the particular item within an Order. The ‘Applied Taxes’ are ones that are automatically applied to each new Order and therefore cannot be removed from this menu.

Note: You can choose multiple available taxes to apply to an item.

Change item taxes within Orders

You can also change item taxes from within an Order. Go to the Orders tab and click on the particular Order. From the Order Details page, click on the edit icon and add a new column called ‘Applied Taxes’.

With this new column, you can now change the item taxes from the Order Details page. Simply click the ‘Change Tax Rate’ button highlighted below:

This opens up the following overlay, where you can add and remove the line item taxes, but cannot edit the Order level taxes:

Once you’re done, click ‘Apply Taxes’ to save the changes.

Note: Line item taxes will also be applied to any item-level damages and item-level discounts that are present in the Order, as shown below:

Importing Line Item Taxes from Excel

You can also set up Item Level Taxes when importing items (Asset, Asset Stock, or Inventory). Let’s look at how to apply the tax while importing Assets. Simply go to Items → Assets → Import Assets → Add new Assets or Update Existing Assets. Once you upload the Excel file, you can map the Item Level Taxes column in the file to the corresponding field in EZRentOut, as shown below:

item level tax rate

Once you’re done, simply click ‘Proceed’.

Note: The import functionality only enables you to add new taxes when adding or updating Assets. You cannot use this functionality to update existing taxes already assigned to Assets.

How is the tax amount calculated?

An order is populated with 6 items, each having an item-level sales tax of 9.25%. In the example below, the total item-level sales tax is $10.90. Sales tax is calculated for each item and rounded to two decimal places when item-level taxes are applied. Let’s calculate the sales tax for the example given below:

Step 1: Multiply the price by the tax rate.

Step 2: The answers are rounded off to 2-decimal places.

Step 3: Add up all of the rounded-off numbers.

ItemPrice Tax rate Sales Tax amount 2-decimal place round off 
Yellow pavement marker $189.25%1.6651.67
Yellow chip seal marker $5.59.25%0.508750.51
Type 1 Barricade $429.25%3.8853.89
NO parking signal $33 9.25%3.05253.05
Blue pavement marker$39.25%0.27750.28
Stop slow paddle $16.259.25%1.5031251.50
Sales tax Total 10.90

When Order level taxes are applied in the same order, the total tax amount differs by one decimal point i.e. $10.89 as shown below. The sales tax on each item is added to calculate the total tax amount without rounding off to 2-decimal places. Let’s calculate the sales tax for blue pavement marker: 

Step 1: Multiply the Total Order amount by the Tax percentage.

Step 2: The total tax amount, i.e.: 10.891875 is rounded off to 2-decimal places as shown below.

ItemPrice Tax rate Tax Amount 
Yellow pavement marker $18
Yellow chip seal marker $5.5
Type 1 Barricade $42
NO parking signal $33 
Blue pavement marker$3
Stop slow paddle $16.25
$117.75 9.25%10.891875
Sales tax Total (rounded to 2 decimals)10.89 

Line Item Taxes in Printouts

Line item taxes related sections have also been added to Printout Templates. Go to More → Printout Templates → Order and open any template of your choice to edit. Once the template opens up, scroll to the Order Line Items section.

From this section, you can add relevant fields to the template, such as the tax rate, applied tax, and calculated tax amount. To do so, click the ‘+ Add’ button on the right. This opens up the following overlay, from where you can select the field of your choice:

Once you’re done, don’t forget to scroll down and click the ‘Update’ button.

Have any questions?

EZRentOut is the leading equipment rental software used by SMBs all over the globe. Sign up today for a free 15-day trial.

For more assistance, drop us an email at support@ezo.io.

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