Tax Settings

Set up your tax rates and tax codes once, and DayZero applies them when you create invoices, bills, and transactions. Rates are stored as precise decimals tied to a jurisdiction (country, state, county, city) and can post collected tax to a dedicated liability account. Where a sale is subject to more than one tax (state plus city, say), an invoice can carry multiple tax lines that are tracked and totaled independently.

Key capabilities

• Tax rates kept precise (e.g. 7.25%) with formatted display
• Six tax types: sales, use, VAT, GST, HST, PST
• Jurisdiction fields — country (defaults to US), state, county, city — rolled up into a readable label
• Optional link to a tax-liability ledger so collected tax posts to the correct account
• One default rate per business; setting a new default clears the previous one
• Filter rates by jurisdiction (country / state) for quick lookups
• Tax codes that classify items as taxable or exempt (e.g. TAXABLE, EXEMPT, NONTAXABLE, RESALE)
• Multiple tax lines per invoice — each stores its own taxable amount and tax amount (state + local)
• Per-line effective-rate calculation for reconciliation
• One-click seeding of the standard tax-code set for a new business
• AI tax-rate suggestions based on your existing rates
• Deactivate both rates and codes, preserving history
• Tax-rate changes are written to the audit log

How it works

A rate pairs a decimal percentage with a jurisdiction and an optional liability ledger. When a document is taxed, DayZero multiplies the taxable amount by the rate, records a tax line, and posts the collected amount to the liability account.

flowchart TD
  rate["Tax rate (decimal + jurisdiction)"] --> doc["Invoice / bill created"]
  code["Tax code (taxable / exempt)"] --> doc
  doc --> taxable["Taxable amount"]
  taxable --> calc["tax = round(amount x rate)"]
  calc --> line["Tax line(s): state + local"]
  line --> liability["Posts to tax-liability ledger"]

How to use it

1. Open Tax Settings (/books/tax-settings) and stay on the Rates tab.
2. Click Add Tax Rate, then enter a Name (e.g. CA Sales Tax), the Rate (as a percentage), the Tax type, and the Jurisdiction (state/county/city).
3. Optionally pick a Tax-liability ledger so collected tax posts to that account, and toggle Set as default.
4. Switch to the Codes tab and click Seed defaults (or Create) to load tax codes like TAXABLE and EXEMPT.
5. For layered taxes, add a separate rate for each jurisdiction (e.g. one state rate and one city rate) — both can apply to the same invoice as distinct lines.
6. Use the AI Suggest rates panel to get jurisdiction ideas for a US small business, then add the ones that apply.

Pro tips

• Enter rates as the percentage you know (7.25%); DayZero stores it precisely so rounding stays correct to the cent.
• Set up every applicable jurisdiction up front so the right rates are ready in dropdowns when you invoice.
• Link each rate to a tax-liability ledger so your balance sheet always shows what you owe authorities — and reconciles cleanly at filing time.
• For combined state + local tax, model each layer as its own rate rather than one blended number, so reporting by jurisdiction stays clean.
• Use tax codes to mark resale or exempt items so they're never taxed by mistake.

In-depth guide

Tax types

Rate configuration & calculation

• Rates are held precisely (e.g. 8.75%) and displayed as a percentage.
• Tax on an amount is the amount × the rate, rounded — so a $100.00 sale at 8.75% yields $8.75.
• The jurisdiction is shown as a single readable label joining city, county, state, and country.

Default tax codes seeded

Seeding does nothing when codes already exist, and each code must be unique per business.

Multiple rates (state + local)

An invoice can carry several tax lines for layered jurisdictions:

• Each line references a different rate and stores its own taxable amount and tax amount.
• Layers (e.g. a state rate plus a city rate) stay separate and independently auditable rather than blended into one figure.
• Each line can report an effective rate (tax amount ÷ taxable amount) for reconciliation.

Accounting impact

• When a rate is linked to a tax-liability ledger, collected tax accumulates there as a liability you owe the taxing authority — keeping revenue and the tax obligation cleanly separated. The liability clears when you remit.
• Deleting a rate detaches it from the ledger link, so removing a rate never corrupts posted entries.
• An in-use rate can't be deleted out from under an invoice.

Edge cases

• Deactivating a rate or code hides it from new documents but leaves historical tax lines intact.
• Country defaults to US when not specified; state/county/city are optional and only refine the jurisdiction label.
• AI suggestions are advisory — review each before adding, since rates and nexus rules vary by location and change over time.

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