[Disclaimer: The team at A2X are happy to provide users with technical assistance in applying tax rules to their A2X setup. We are not Tax Advisors and so our advice and suggestions on the application of tax rules cannot be construed as tax advice. We highly recommend that users seek advice from qualified accountants for their tax compliance.]
Zero VAT rated products
Most sellers will typically sell products with a single tax rate, but in some situations a business may sell products at several rates. The introduction of a second tax rate can make things a little more complicated.
For example, baby clothes are zero rated for VAT in the UK.
There are 3 main steps to set up when you have different VAT rates to apply:
Step 1 - Invoice Settings - group by product type
Invoice Settings should be set to ‘Group Sales by Product Type’ if you have variable rates based on product category such as baby clothes in this example.
Step 2 - Product types - set your SKU groups
Set up Product SKUs for each Product Type that has a specific VAT rate.
Product Types are a way of grouping products together for special tax or accounting treatment in your accounting system. If you prefer to post sales by product type rather than all products in aggregate, then you can configure product types based on one or more product SKUs.
Step 3 - Accounts and Taxes - complete the mapping
Create the correct VAT rates when mapping accounts and Taxes. Because you have grouped by product type and named the SKUs that belong to each product type, A2X will now let you define your VAT rates based on sales by product type, for example 0% and 20%.
Please note: You will need to refresh all the settlements you wish this change to be applied to before it will show up in Accounts and Taxes.
In Accounts and Taxes, if you expand your Sales and Refunds, and Shipping section, you will notice the grouping of transactions by Product Type to which you can apply the correct tax rate.
Sales - adult £1200 (20% VAT)
Sales - children £1000 (0% VAT)
Now when you send those transactions to your accounting system the correct tax rate will be applied and will be used in your VAT return.