Understanding Tax Rates and Tax Classes

Simphony uses two tax handling files to assign taxes to menu items, discounts, and service charges:

• Tax Rates

• Tax Classes

A tax class is a collection of tax rates. Tax classes determine the tax rates that apply to menu items and service charges, and which tax rates can be reduced by discounts. A tax class can have up to 64 active tax rates, but typically a single tax class has one to three tax rates. By grouping multiple tax rates into a single tax class, you can easily see a record named Food Tax in other EMC modules without wondering which tax rates are active.

You can associate a tax class with the following types of records:

• Menu Item Class: All menu item definitions in the menu item class are taxed using the tax class

• Discount: Specific tax rates can receive a discount when a menu item is discounted

• Service Charge: Specific types of services charges are taxed, such as banquet and room service transactions

In some jurisdictions, multiple tax rates apply to food items. Usually these tax rates must be calculated separately for accounting purposes (allowing each jurisdictional government to collect the appropriate tax amount). Generally a restaurant must pay taxes to both the state and the city:

• State – 5% tax

• City – 2% tax

In this example, both the state and city tax rates are active for the Food tax class. The total tax for a food item would be 7%.

For customer convenience, bars often use inclusive taxes. In some properties with multiple revenue centers, it is common that a bar revenue center uses inclusive taxes while a restaurant revenue center uses add-on taxes, even though both revenue centers serve the same items. In this scenario, the configuration of a Liquor tax class might be:

• Inclusive tax rate – 5%

• Add-on tax rate – 5%

Using this scenario, you can set either order types or serving periods to have the appropriate tax rates in the revenue centers. The following table shows an example configuration using Order Types:

Table 13-2 Example of Inclusive Tax with Multiple Revenue Centers

Revenue Center	Order Type Tax Configuration
Bar	Inclusive tax rate enabled Add-on tax rate disabled
Restaurant	Inclusive tax rate disabled Add-on tax rate enabled