When you create a sales tax in Wave, Wave automatically adds a sales tax liability account to your Chart of Accounts. This account is named after the sales tax you created. Each time you create a transaction that includes sales tax, the tax amount is recorded in this liability account.
If you manage multiple sales taxes, ensure that each tax has a name you can recognize easily.
View your sales tax transactions
How sales tax is calculated
There are 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 and then added to that price to determine the transaction total. Common examples are invoices and bills.
- Inclusive of tax: sales tax is included in the total transaction amount. The pre-tax amount comes from the total and the sales tax rate. This method is often used for income and expense transactions.
View your sales tax transactions
You can view your sales tax transactions using two reports: the Sales Tax report and the Account Transactions report.
The Sales Tax report is a summary of all transactions categorized by individual sales tax. It organizes information on:
- Tax collected
- Tax paid
- Payments or refunds to and from the government
Learn more about How to use the Sales Tax Report.
Sales tax in Wave is calculated per line item and rounds to the nearest 2 decimal places.
The Account Transactions report displays:
- Beginning balance of the sales tax account
- All account activity
- Ending balance of the account
Transactions are totalled by debits and credits, which may not align with the total tax collected and paid shown in the Sales Tax report.