Tax on invoices is calculated per line, using the tax rate assigned to that invoice. The rate itself is configured under Settings > Invoicing > Tax Rates; each invoice carries exactly one rate.

How the math works

  1. Each line on the invoice has its own taxable state. Taxable lines have their line total multiplied by the invoice's tax rate and that becomes the tax amount for that line. Non-taxable lines get zero tax.
  2. The Miscellaneous Charge (if your shop has one configured) is taxed if its single "Miscellaneous Charge Taxable?" toggle is on under Settings > Invoicing; otherwise it is not.
  3. The CC surcharge (if your shop has surcharge enabled and the payment is credit card) follows its own Taxable toggle under the Credit Card Surcharge section of Settings > Invoicing.
  4. The grand total is computed as subtotal + misc charge - discount + tax. Discounts are taken from the grand total after tax is computed, so the tax base is the pre-discount line totals.

When a line is taxable

  • Product lines default to Taxable. The default is overridden if either the product itself is flagged tax-exempt, or the customer or dealer on the invoice is flagged Tax Exempt.
  • Labor lines follow the shop-wide "Is labor taxable?" setting under Settings > Invoicing. It is on by default, so labor is taxed like any other line. Turn it off, for states that do not tax labor, and every labor line on new and edited invoices and estimates is charged no sales tax automatically. Already-posted invoices keep the tax they had.
  • Discount lines never carry tax.

Tax-exempt customers and dealers

Set Tax Exempt on the customer or dealer record. From then on every invoice you create for that party defaults the whole invoice to Tax Exempt at the top of the invoice form, including a tax exemption certificate ID if you captured one. The invoice's grand total skips tax entirely. You can still override on an individual invoice if needed.

Your miscellaneous charge on the invoice

If your shop has a miscellaneous charge configured (many shops call it Shop Supplies), it appears as its own line in the totals block, under the subtotal. It shows on screen, on the printed and emailed copy, and on the public link you send a customer. It is labelled with the name you gave it in Settings > Invoicing.

An invoice always shows the amount it was actually billed, not a fresh calculation. If you change your miscellaneous charge percentage, only new and edited invoices use the new rate; every invoice you already finalized keeps the figure it was created with. The same is true of your tax rate. That is why the totals block names the charge without repeating a percentage beside it: the percentage on file today may not be the one an older invoice was billed at.

Where to see your tax math

  • Each invoice shows the tax computed in its totals block.
  • The Tax Collected report under Reports > Accounting aggregates tax across invoices by date and rate for filing.