When you create a sales tax in Wave, Wave automatically adds a sales tax liability account to your Chart of Accounts. This account uses the name of the sales tax. Every time you create a transaction that includes this tax, the tax amount is recorded in this liability account.
If you manage multiple sales taxes, use names you can recognize easily.
View your sales tax transactions
How sales tax is calculated
Wave uses two types of sales tax calculations in Wave: exclusive of tax and inclusive of tax.
- Exclusive of tax: Sales tax is calculated based on the base price, then added to that price to get the transaction total. Common examples are invoices and bills.
- Inclusive of tax: Sales tax is already included in the total transaction amount. Wave uses the total and the sales tax rate to find the pre-tax amount. This method is often used for income and expense transactions.
Sales tax in Wave is calculated per line item and rounds to the nearest 2 decimal places.
View your sales tax transactions
You can view your sales tax transactions using two reports: the Sales Tax report and the Account Transactions report.
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The Sales Tax report summarizes all transactions for each individual sales tax. It shows information on:
- Tax collected
- Tax paid
- Payments or refunds to and from the government
Learn more about how to use the Sales Tax Report.
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The Account Transactions report displays:
- Beginning balance of the sales tax account
- All account activity
- Ending balance of the account
The report totals transactions by debits and credits. These totals might not match the total tax collected and paid shown in the Sales Tax report.