All taxes a processed at the sales line item level and then added together to provide the total tax on the invoice.
Overview
Calculations for taxes always occur at the sales line item level, as opposed to calculating based on the sub total of the invoice.
This allows operational flexibility from an accounting standpoint between additions, changes and incremental postings of sales.
For each sales item, the tax is calculated on price of a single unit, then rounded and multiplied by the quantity.
- 1 Coke @ $0.95
5% of $0.95 = $0.0475 = $0.05
$0.95 + $0.05 = $1.00
10 x $1.00 = $10.00
Once the tax for every sales line is calculated, the tax total is known. The sub total is then added to this tax total for the grand total.
For comparison, if the tax were charged after the quantity x price, it could yield confusing results for staff and customers.
- 10 Coke x $0.95 = $9.50
5% of $9.50 = $0.475 = $0.48
$9.50 + $0.48 = $9.98
