Select Maintenance > Taxes > Tax Type to access this function.
The Aloha system can meet the needs of virtually any taxing jurisdiction. You calculate taxes using a flat rate, or you can set up and utilize tax breakpoints using a tax table. You can also define taxes for use with items that require conditional taxation when purchased under different circumstances. For example, it is possible to not charge tax on a soft drink when it is ordered individually, but charge tax when the soft drink is ordered with food. You can also identify a tax as a Goods and Services Tax (GST), which taxes every item on a guest check unless you identify the item as exempt. You can define up to 999 taxes.
Warning: The information contained here regarding taxes is intended solely as a guide for use with Aloha software. Consult specific state and federal regulations regarding collecting and reporting taxes for your establishment.
When you create a new tax type in the database, you must select the type of tax you want to add. Select from the following types, when you click the New drop-down-arrow to add a new tax type:
Primary Tax represents the principle tax used to calculate taxes for items sold at a restaurant. You must assign every item in the database a primary tax. Even if the item is not taxed, you must still apply a tax rate of zero percent (0.00%). Depending on your tax jurisdiction, you can use a flat percentage rate or a tax table, to calculate the primary tax.
Secondary Tax represents a jurisdictional tax that works in conjunction with the primary tax. Some establishments must apply two taxes to a sale, such as a state and a city tax. In this situation, you assign both a primary and secondary tax to each applicable item in the database. Depending on your tax jurisdiction, you can use a flat percentage rate or a tax table, to calculate the secondary tax.
Vendor represents a tax that some product suppliers assess to items purchased by the restaurant. Your establishments can pass along the vendor tax to customers. To recoup the vendor tax, you must add a vendor tax to each applicable item in the database. You can use the vendor tax as a primary tax, or as an additional tax placed on an item.
GST represents a multi-level value-added tax (VAT) used in international environments. This tax charges a certain percentage of the sale amount of all goods and services; however, you can exempt certain items from the GST tax, as allowed. You apply the GST tax at the item level rather than the guest check level, and after other taxes are applied to the guest check. For example, if the guest check subtotal for a sandwich is $5 and the primary tax applied is 5%, the new subtotal is $5.25. If a GST tax of 3% is in effect, the system calculates the tax against the new subtotal ($5.25), which brings the guest check total to $5.40.
Occupational Tax represents a privilege or license tax on certain types of businesses, such as hotels, car rental companies, restaurants, and bars. You must calculate the occupational tax on the check total before applying other taxes, and then use this subtotal to calculate state and local sales tax. You cannot combine the occupational tax with any other tax for a flat rate. Additionally, if you configure an item for inclusive taxes, you calculate the overall sales tax amount based on the item price plus the occupational tax.
Tax Quick tips
There are several rules to follow when you add and maintain taxes in the system:
- You never assign a tax type record directly to an item. You assign tax types to specific tax groups, and then assign an applicable tax group to an item.
- ou can create five different tax types in the Aloha POS system: Primary Tax, Secondary Tax, Vendor, GST, and Occupational Tax.
- You must associate every item in your POS database to a Primary Tax tax type; therefore, every tax group you define must include a Primary Tax type, even if you set the primary tax rate to zero percent (0.00%).
- Tax methods can be exclusive or inclusive, which use different formulas to calculate tax.
- Secondary taxes use the Exclusive tax method.
- Tax jurisdictions that follow tax table guidelines, such as those in Florida, use breakpoints to calculate tax.
- A flex tax rule is not a type of tax; it is a guideline that works with existing primary and secondary taxes, based on conditional taxation rules.
- You cannot apply an inclusive tax to a surcharge.
Tax Type tab
Use the Tax Type tab to establish the name of the tax, the tax rate, and the tax method. You also set the minimum amount to apply to a check before applying a tax.
Group Bar: Settings
Name — Identifies the tax record. Type a maximum of 15 characters.
Description — Provides a more detailed description for the tax record. Type a maximum of 50 characters.
Method — Indicates the method of calculation the system uses to determine the tax amount.
Inclusive Rate — Shows the tax included in the stated price of an item. When a customer orders a drink in the bar area of a restaurant, sales tax is often included in the price of the drink, as a convenience to both the restaurant and the customer. Related Options: This method appears only when you select Primary or GST as the tax type.
Exclusive Rate — Calculates a tax as an amount added to the price of an item. When prepared food and drinks are sold in restaurants, the sales tax is normally stated separately and added to the total bill. Related Options: This method appears only when you select Primary, Secondary, GST, or Occupational Tax as the tax type.
Exclusive Tax Table — Uses a tax table to calculate sales tax. When you select this method, the Non-Repeating Table and Repeating Table tabs appear, into which you must enter the appropriate data obtained from your taxing jurisdiction. Related Options: This method appears only when you select Primary, Secondary, GST, or Occupational Tax as the tax type.
Vendor Inclusive — Shows the vendor assessed tax included in the stated price of an item. When a vendor assesses a separate charge, you pass along that assessment to the customer. Required Options: This method appears as the only choice when you select Vendor as the tax type.
Percentage — Indicates the default tax percent to apply to each item. Related Options: This option is not available when you select Exclusive Tax Table from the ‘Method’ drop-down list.
Minimum taxable amount — Designates the minimum sale amount required before the system applies a tax. This is used in tax jurisdictions, such as the Canadian Province. Related Options: You must select Primary Tax or Secondary Tax as the tax type to enable this option.
Maximum tax amount — Designates the maximum allowable tax amount assessed for the selected tax type. Some state and city laws impose a limit on the amount of tax that can be applied to a check. For example, the city tax of Wasilla in Alaska states that the ‘first $500.00 of any one sale or transaction must be taxed at the current 2% rate; however, a customer cannot be charged more than $10.00 in sales tax on any one transaction.’
Property Management System tax ID — Enables you to select one of four specific tax categories, typically for room charge postings. These are labeled ‘PMS Tax 1’ through ‘PMS Tax 4.’
Accounts receivable account — Interfaces with the Aloha Accounts Receivable product. There are eight tax rate text boxes located on the General tab in Accounts Receivable. These are labeled ‘POS Tax Rate 1’ through ‘POS Tax Rate 8.’ Select the ‘POS Tax Rate’ text box that corresponds with this tax record. Related Options: This option is not available when you select GST as the tax type.
Use smart tax (TS only) — Automates the task of changing items from an inclusive tax to an exclusive tax only if another item on the guest check is taxed exclusively. The inclusive taxes involved must be configured to have exclusive tax reassignments. Any item that is taxed inclusively remains so, unless another item on the check is taxed exclusively. When this is the case, the inclusive tax is replaced by the exclusive tax reassignment. Required Options: 1) You must access Maintenance > Business > Store > Store Settings tab > Financials group and select ‘Enable smart taxes’ under the ‘Taxes’ group bar to use this feature. 2) You must select Inclusive Rate from the ‘Method’ drop-down list to enable this option.
Exclude from tax exempt — Prevents this tax type from being included when tax exempt and taxable items appear on the same guest check. Documented Version: v14.1
Non-Repeating Table tab
The Non-Repeating Table and Repeating Table tabs appear only if you select Exclusive Tax Table as the ‘Method’ for calculating the tax. The system uses the information you configure on these tabs when a taxing jurisdiction, such as the state of Florida, requires you to follow a tax table to calculate taxes instead of using a flat percentage rate. A tax table establishes breakpoints to indicate at which sales amount the guest pays a higher tax amount. As you configure a tax table, the first few breakpoints do not fall into a pattern and are known as non-repeating breakpoints; however, as you continue entering breakpoints into the tax table, there is a point at which the tax table begins repeating itself, known as the ‘period of tax repetition.’ You type each of the non-repeating breakpoints in the Non-Repeating Table tab. As soon as the repeating cycle begins to occur, you select the Repeating Table tab and continue typing the breakpoints from your tax table. You need only type as many breakpoints as needed before the pattern repeats again.
Use the Non-Repeating Breakpoints tab to establish the initial tax values and breakpoints to apply to a specific range of sale amounts, before the tax breakpoints start to repeat.
Group Bar: Non-Repeating Breakpoints
A breakpoint is the value you must add to the total sale before being taxed at the next higher tax amount. You determine the amount for each breakpoint by subtracting the lower ‘Tax Amount’ value on the tax table from the next higher ‘Tax Amount’ value.
The first breakpoint you type is equivalent to the lowest amount a guest must purchase before accruing any tax. For example, the guest check must total at least 10 cents ($0.10) before the system calculates any tax on the purchase. You determine the value for each breakpoint that follows by subtracting the next higher ‘Tax Amount’ value on the tax table from the ‘Tax Amount’ value just above it. Continue with this calculation until you reach a point where the pattern repeats. Required Options: You must select Exclusive Tax Table as the tax method for this tab to appear.
Breakpoint — Indicates the currency amount that will be taxed.
Tax Amount — Displays the calculated tax amount. The system multiplies the row number by 0.01 to calculate the tax amount for the current row. Note: The first row is considered zero (0.00).
From — Displays the calculated ‘From’ breakpoint range amount. The first row has a value of 0.00. The system takes the ‘To’ value from the previous row and adds 0.01, to calculate the ‘From’ value of each subsequent row.
To — Displays the calculated ‘To’ breakpoint range amount. The system takes the Breakpoint value from the current row and subtracts 0.01. The system then adds the new total to the ‘From’ value on the current row, to calculate the ‘To’ value.
The following table provides a sample of a non-repeating tax table:
Repeating Table tab
Use the Repeating Table tab when a certain taxing jurisdiction requires you to follow a tax table chart instead of a flat percentage. When you configure a tax table, you establish break points to indicate at which point a sale amount warrants a higher tax value. As you define your breakpoints, a repeating cycle starts to occur.
Use the Non-Repeating Table tab to enter the breakpoints that occur prior to falling into a pattern; use this tab to establish the tax values and breakpoints to apply to a specific range of sale amounts, after the tax breakpoints start to repeat. Required Options: You must select Exclusive Tax Table as the tax method for this tab to appear.
Group Bar: Repeating Breakpoints
Breakpoint — Indicates the currency amount that will be taxed.
Tax Amount — Displays the calculated tax amount. The system takes the ‘Tax Amount’ value from the previous row and adds 0.01, to calculate the tax amount for the current row.
Initial From — Displays the calculated ‘Initial From’ breakpoint range amount. The system takes the last ‘To’ value that appears on the Non-repeating tax table and adds 0.01 to calculate the ‘Initial From’ value for the first row. For each subsequent row, the system takes the ‘Initial To’ value from the previous row and adds 0.01, to calculate the ‘Initial From’ value. Note: If no values exist on the non-repeating tax table, the value for the first row is 0.00.
Initial To — Displays the calculated ‘Initial To’ breakpoint range amount. The system takes the Breakpoint value from the current row, subtracts 0.01, and then adds the new total to the ‘Initial From’ value, to calculate the ‘Initial To’ value.
Repeat From — Displays the calculated ‘Repeat From’ breakpoint range amount. The system takes the ‘Initial To’ value from the last row and adds 0.01, to calculate the first ‘Repeat From’ value. Each subsequent ‘Repeat From’ value is calculated by taking the previous rows ‘Repeat To’ value and adding .01 to it. If there is only one row, the system takes the ‘Initial To’ value from the current row and adds 0.01, to calculate the ‘Repeat From’ value.
Repeat To — Displays the calculated ‘Repeat To’ breakpoint range amount. The system takes the Breakpoint value from the current row, subtracts 0.01, and then adds the new total to the ‘Repeat From’ value, to calculate the ‘Repeat To’ value.
The following table provides a sample of a tax table once the pattern begins to repeat: