Tax a Tax using Fixed Fees
Taxing a tax typically involves imposing an additional tax on an existing tax, often at different levels of taxation. This practice is utilized by governments or authorities to generate revenue or shape behavior. In Visual Matrix, taxes are configured as accounting codes in the management accounting settings, while their percentages or amounts are established in the tax section of the property settings. Since a tax accounting code cannot be used twice - once as part of the revenue tax and a second time applied to another revenue tax - it must be duplicated and set up separately.
Let's say there's a revenue tax consisting of three components: state tax, city tax, and a hotel stay tax. This later, however, needs to be subject to the state tax as well. To accommodate this, you would create the state tax twice under two separate accounting codes:
- The first instance of the state tax is used in the revenue tax section, alongside the city tax, forming the revenue tax.
- The second instance of the state tax is used in the sales tax section to tax the local tax.
This setup allows for the local tax to be subject to the state tax, effectively "taxing a tax." The local tax would be structured as a fixed fee and then taxed by the state tax set up in the sales tax section.
Let's begin with a typical tax configuration as depicted below with 2 taxes included in the Revenue Tax package. From here, we'll demonstrate two methods to implement a double taxation.
Set up the tax to be taxed with all Revenue Taxes
1. Create a new accounting code for the new hotel stay tax.
2. Go to "Management > Property Settings > Fixed Fees".
3. Configure the hotel stay tax by specifying whether it will be a fixed amount or a percentage, and indicate whether it will apply to the posted room revenue or the room revenue off rack.
4. Ensure it is subject to taxation by the Revenue tax package (consisting of the State and City taxes as seen above).
5. This will automatically apply all Revenue Taxes to this fee when the audit posts the Room and Tax, as illustrated below.
Configure the tax to be subject to one of the taxes already applied in the Revenue Taxes setup.
1. Create a new accounting code for the new hotel stay tax.
2. Create a new accounting code for the State tax that is already used in the Revenue Tax package and will need to be added to the Sales tax package (as State Tax 2, for example).
In the provided example, code 90 designates the State tax for the revenue tax package, while code 91 signifies the State tax for sales, which will be applied to the additional "Hotel Stay Tax."
3. Go to "Management > Property Settings > Taxes".
4. Add the "State Tax 2" to the Sales tax section.
5. Go to "Management > Property Settings > Fixed Fees".
6. Configure the hotel stay tax by specifying whether it will be a fixed amount or a percentage, and indicate whether it will apply to the posted room revenue or the room revenue off rack.
7. Ensure it is subject to taxation by a Sales tax and select the new "State Tax 2" that we created earlier.
8. This will only apply the "State Tax 2" to the "Hotel Stay Tax" when the audit posts the Room and Tax, as illustrated below.
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