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Tax Rate Priorty


RCB

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I have seen several other posts on this topic, however as all posts that I could find had horrendous answers (including unnecessary code hacks) I would hope to get a response from someone who actually knows the answer. Please if you do not understand this issue do not reply and do not cut and past the manual I have read it, it does not answer the question. I understand that this option was likely created for Canada (we love to pay taxes on taxes) and that is why there may be little understanding of how this is used.

 

Multiple taxes for the same rate can either be added together or compounded using the Tax Rate Priority field. An example of this would be in Canada the province Manitoba has 2 taxes. A 5% Federal tax (GST) and a 7% provincial tax (PST) which are added together for an effective tax of 12%. In this case it’s clear that the tax priority must be the same, for example they could be both set to 0.

 

The province of Quebec however has 2 taxes which are compounded. A 5% federal tax (GST) and a 8.5% provincial tax (QST) which are compounded, the federal tax first then the provincial tax is applied to the sales amount and the federal tax combined. The effective rate is 13.925% The OSC manual states that to compound taxes they must have a different priority. This sounds simple enough except that the manual does not specify which priority has priory over the other. In other words which priority is calculated first. For example, for Quebec if I assign priority 0 to the federal tax and priority 1 to the provincial tax, which tax will be calculated first?

 

So the summary question is, When using tax rate priority to compound taxes is a higher priority value calculated before or after a lower priority value. (0 then 1 or 1 then 0)

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