Set Up Compound Taxes (Tax-on-Tax) in Visual Matrix (PMS)
Some cities or counties require hotels to apply certain taxes not just to the room charge, but to the room charge plus another tax—commonly called a “compound” or “tax-on-tax” scenario. Visual Matrix doesn’t support this calculation directly, but with the right setup, you can still collect the correct tax amounts by adjusting the percentages.
Understanding the Scenario
Let’s look at an example based on a property’s accountant’s request:
Charge Type | Amount |
Room Charge | $100.00 |
Occupation Tax - 5% | $5.00 |
Taxable Base for other Taxes | $105.00 (Room + Occupation Tax) |
Now apply taxes to the $105.00 total:
Tax Type Percent | Result |
State Sales Tax - 2.75% | $2.89 |
Local Sales Tax - 2.00% | $2.10 |
Lodging Tax - 5.00% | $5.25 |
Visual Matrix only applies taxes to the room charge, not to other taxes. That means we need to calculate and enter adjusted tax percentages that will produce the correct dollar amounts.
How to Set It Up
Step 1: Calculate Effective Tax Rates
To find what rate needs to be entered in Visual Matrix, use this formula: Effective Rate = Intended Tax Amount ÷ Room Charge
Tax Name | Intended Amount | Effective Rate |
Occupation Tax | $5.00 | 5.00% |
State Tax | $2.89 | 2.89% |
Local Tax | $2.10 | 2.10% |
Lodging Tax | $5.25 | 5.25% |
Step 2: Enter Tax Codes in the PMS
Set up your tax codes using the adjusted effective rates
Code | Description | Rate |
90 | Occupation Tax | 5.00% |
91 | State Sales Tax | 2.89% |
9LCT | Local Sales Tax | 2.10% |
9 | Loging Tax | 5.25% |
Final Billing Breakdown for Guest
Line | Item Amount |
Room Charge | $100.00 |
Occupation Tax - 5.00% | $5.00 |
State Sales Tax - 2.89% | $2.89 |
Local Sales Tax - 2.10% | $2.10 |
Lodging Tax - 5.25% | $5.25 |
Total Collected | $115.24 |
Summary
When required to tax on top of other taxes, you can still meet your jurisdiction's requirements in Visual Matrix by:
- Calculating the effective percentage for each tax based on the total taxable amount.
- Entering each adjusted rate in the system using separate tax codes.
- Verifying that the final amount collected from the guest matches your accountant's totals.
If you're unsure how to calculate your effective rates, feel free to reach out with your tax structure—we’re happy to help