Overview: Taxes and tax groups

The information in this topic applies to the taxes functionality in R20 and lower. To learn about the enhanced taxes feature available in R21, refer to Overview: Enhanced taxes.

One of the key components of the banquet check is accurate taxing. As the administrator, it is your responsibility to ensure that a property's menus, items, function room rental, and guestrooms are taxed appropriately in order to comply with state and local laws. We have streamlined this process by allowing you to quickly deploy and update your taxes from one centrally managed location—the tax group.

A tax group is a collection of taxes that can be applied as a single set of rules. For example, most of the booking events at your property are subject to a state sales tax of 4.0% and a local sales tax of 4.5%. Rather than manually applying those taxes to each and every menu and item at your property, you might create a Standard Tax Group, add the taxes to it, and then assign that tax group as the default for your property. When a user creates a new booking event, the Standard Tax Group will default on to the event and the appropriate taxes will be automatically calculated when the banquet check is run. If the property's default tax group isn't applicable to a particular booking event, the user can select a different tax group. For example, you might also have an Exempt Tax Group that is used for the occasional non-profit organization.

What are the advantages of tax groups?

• Updates can be made from one central location. When changes are made to an individual tax, the tax group is automatically updated and the new tax information is used to generate the booking check or banquet check charges. Because tax groups are applied at the booking event level, there is no need to manually update the individual menus and items on the event or in Setup.
• Menus and items are taxed accurately. Some of the taxes in a tax group might only pertain to certain menus and items (for example, an audio visual tax of 5.0%). How does the system know which taxes to apply to a menu or item? When you add a tax to a tax group, you associate the tax with one or more revenue classifications. Since menus and items are also associated with revenue classifications, which tax should be applied is based on matching revenue classifications. In the case of the audio visual tax, only items with a revenue classification of Audio Visual will be subject to that 5.0% tax.
• Guestroom taxes are automatically applied. You can create a guestroom tax and add it to your property's tax groups. The tax will be automatically applied to all guestrooms blocks and will be displayed on the booking check.
• Taxes accommodate multiple tax rates and effective dates. Each tax you define can have a schedule of tax rates. For example, your local sales tax might be 4.5% in 2014 but is projected to go up to 4.7% in 2015. When you add the local sales tax, you can define both rates and indicate which date range each is applicable to. For each booking event where the local sales tax has been assigned (via a tax group), we will automatically apply the correct rate based on the event's date. There's no need to manually update each menu and item every time a tax rate changes—we do all the work for you.
• Gratuity and administrative charges are automatically taxed. The taxes in a tax group can be applied to the base price of a menu or item, its gratuity, and/or its administrative charge. When a tax group is applied to a booking event, we determine how to tax a menu or item by matching its revenue classification with a revenue classification in the tax group. For example, a Continental Breakfast is 12.95 per person and is subject to an 18% gratuity charge (based on its Food revenue classification). Your 4% local sales tax applies to the base price of a Food menu or item as well as its gratuity. When that menu is then added to a booking event, its base price (12.95) and gratuity (2.33) will be automatically taxed at the 4% rate.

  If a menu contains items from multiple revenue classifications, its revenue breakdown indicates which portion of the overall menu price should go to each revenue classification. For example, the Dream Wedding Package is $95.00 per person. The package includes all food, beverage, and audio visual and is allocated as follows: 55.00 to Food, 30.00 to Resource, and 10.00 to Audio Visual. As such, this menu is associated with three different revenue classifications, each of which might be taxed differently.

• All taxing happens "behind the scenes". Because the tax group structure is based on revenue classifications, all menus and items—including those created on-the-fly—are automatically taxed appropriately. This saves users time and ensures that the banquet check charges are accurate.

To implement tax groups, you need to do the following:

1. (Optional) Add additional revenue classifications to meet your reporting and taxing needs.
2. Enter the default gratuity and administrative charge for every revenue classification.
3. Create each of the property's individual taxes.
4. Create the tax groups.
5. Add the appropriate taxes to each tax group.
6. Associate revenue classifications with each tax in the tax group.
7. Assign a default tax group to the property.