Overview

This article describes how to set up taxes in Heartland Restaurant. The process for setting up taxes for your location depends on the type of taxes that will be applied to its menu items. If all of its taxable menu items only have a single tax applied to them (such as a sales tax), then you can use the basic tax setup process (described in “Basic Tax Setup” section).

However, if your site includes menu items that require certain taxes that other items do not require (such as an alcohol tax), then you must use the advanced tax setup, described in the “Advanced Tax Setup (Room-Level Taxes)” section. This process involves setting up room-level taxes, which enable the POS to apply different taxes to menu items ordered within different rooms.

The features outlined in this article are supported in the following product plans:

• Essentials
• Complete

Basic Tax Setup

The process for basic tax setup requires only two steps:

• Define a “global” tax record to represent a tax that will apply to all taxable items.
• Set each menu item to use an appropriate tax type.

In the following procedures, we describe how to define a global “Sales Tax” and apply it to all taxable items.

Define a Global Tax

1. In the Admin Portal’s Main Menu, click Account Menu, then click Taxes.
2. In the Taxes screen, click New.
3. In the New Tax panel, in the Name box, enter a descriptive name for the tax (“Sales Tax”).
4. In the Default Amount box, enter the percentage amount of the tax.
   For example, if you are creating a record to represent a state’s sales tax and the tax amount is 5%, enter “5.0” in this box.
5. In the Round Down Bracket Start box, enter the start of the round down range.
   For Florida General Sales Tax, this should be “0.01”, conforming to Florida’s Common Sales Tax Brackets.
6. In the Round Down Bracket End box, enter the end of the round down range.
   For Florida General Sales Tax, this should be “0.09”, conforming to Florida’s Common Sales Tax Brackets.
   If you define a range with the Round Down Bracket Start and Round Down Bracket End boxes, the POS will round down tax amounts with non-whole dollar totals with cents that fall within this range. All tax amounts from totals falling outside this range will be rounded up.
7. If necessary, select the Repeating Brackets check box to enable repeating brackets.
   If you enable repeating brackets, the POS will round down the tax every time the taxable total falls within the bracket’s range. If you disable repeating brackets, the POS will only round down the tax the first time the taxable total falls within the bracket range. (Florida uses repeating brackets.)
   
8. Click Save to save the newly created tax.
   

Setting a Menu Item’s Tax Type

After you define a global tax, you must set every menu item to be either taxable or tax exempt. For every menu item you define, you must apply one of three tax type settings to the item’s record. You can do this in the Items screen.

1. In the Admin Portal’s Main Menu, click Account Menu, then click Items.
2. In the Items screen, click an existing menu item record.
3. In the item’s settings panel, find the Tax.
4. In the Tax list, apply one of these settings to the menu item.
   Taxable: This item will be taxed normally. The tax rate will be calculated as a percentage of the item’s price and then added to the ticket’s total.
   Tax Exempt: This item will not be taxed.
   Tax Included: This item will be taxed, and the price of the item will include the tax. The POS will calculate the tax amount based on the original price of the item and then add it into the price of the item.
   
   For additional considerations regarding tax inclusive items, refer to the “Tax Inclusive Items” section.
5. Click Save to save the item’s settings.
   

Advanced Tax Setup (Room-Level Taxes)

Many locations require taxes that apply to some menu items but not all, such as alcohol or luxury taxes. Some locations require taxes that only apply to menu items purchased under certain conditions, such as an “eat in” tax not applied to carryout orders. If your location includes taxes that only apply to certain menu items or only apply conditionally to menu items, then the tax setup process is more complicated.

To configure Heartland Restaurant to apply such taxes properly, you must create room-level taxes. Room-level taxes enable the POS to change tax rates for items based on the room in which they are ordered. When configured properly, room-level taxes override any global taxes.

Configuring the POS to use room-level taxes requires the following steps:

• Enable the location to use room-level taxes.
• Define tax records to represent each tax that will be used in the POS.
• Define tags for conditionally taxed items.
• Configure rooms to manage conditionally taxed items.
• Set each menu item to use an appropriate tax type.

In the following procedures, we describe how to configure the POS to apply a conditional “Alcohol” tax, instead of a global “Sales” tax, to alcoholic beverages ordered within a room.

In a subsequent section, “Advanced Tax Setup: Carryout Service“, we describe how to configure the POS to withhold a global tax (such as a sales tax) from items purchased in a room where taxes may not be applicable (such as carryout service).

Enabling Room Level Taxes

Before defining or configuring any records, you must enable the location to use room-level taxes in the Location Settings screen. Until you do so, the program will only apply the global tax to all taxable items.

1. In the Admin Console’s Main Menu, click Location Setup, then click Settings.
2. In the Location Settings screen, in the App Settings area, select the Room Level Taxes check box.
   
3. Click Save to save the settings.
   

Defining a New Conditional Tax

In the Taxes screen, you must define a tax record for each type of tax that might be applied to items sold at the POS. Most locations require a sales tax, which will be applied to most items. But locations that sell, for instance, alcoholic beverages may require a conditional tax dedicated to alcohol items. Other locations might require a luxury tax applied to certain items. You must define each one of these taxes in the Taxes screen.

In this example, we describe how to define a conditional tax for alcoholic items (“Alcohol Tax”).

1. In the Admin Portal’s Main Menu, click Account Menu, then click Taxes.
2. In the Taxes screen, click New.
3. In the New Tax panel, in the Name box, enter a descriptive name for the tax (“Alcohol Tax”).
4. In the Default Amount box, enter the percentage amount of the tax.
   For example, if you are creating a record to represent a state’s alcohol tax and the tax amount is 10%, enter “10.0” in this box.
5. If necessary, set a round down range by entering the appropriate start and end values in the Round Down Bracket Start and Round Down Bracket End.
6. If necessary, select the Repeating Brackets check box to enable repeating brackets.
   
7. Click Save to save the newly created tax.
   

Some locations provide carryout service alongside dine-in service and may need to withhold sales tax from items sold as carryout orders. To configure a location to withhold a tax in certain conditions (such as carryout orders), you may need to define a tax record with “0.0” amount. For more details, see “Advanced Tax Setup: Carryout Service”.

Define a Tag for Each Conditional Tax

To apply conditional taxes to specific menu items while withholding them from other items, you must define a tag for each conditional tax in the Tags screen. Tags enable you to associate a menu item with certain features, such as taxes. You can use tags to associate a conditional room-level tax to the specific menu items that will be taxed.

1. In the Admin Console’s Main Menu, click Account Menu, then click Tags.
2. In the Tags screen, click New.
3. In the New Tag panel, enter a descriptive name for the tag (such as “Alcohol”) in the Name
4. In the Tag Color list, select a color for the new tag.
5. In the Assigned Items list, select a menu item that the tag’s associated tax will apply to.
   For instance, if you a defining a tag for an alcohol tax, select a menu item that is an alcoholic beverage (any item that will receive the tax).  
6. Repeat Step 5 until you have added every menu item that will receive the tag’s tax to the Assigned Items. 
   
7. Click Save to save the newly created tag.
   

In the Tags screen, you should create a tag for each conditional tax your location will use. You do not need to create a tag for any global taxes that will apply to all taxable items.

Configuring a Room to Use Conditional Taxes

To set the POS to apply different taxes to items based on certain conditions, you must configure the location’s rooms to use these conditional taxes. Room records include settings that enable you to provide special functions and options to servers when they open tickets and place orders.

Every ticket created within Heartland Restaurant is associated with a room. Room records usually represent a physical area of the site where menu items are ordered (such as “Main Dining Room” or “Bar”), but can also represent a non-physical revenue source that a site may need to differentiate from other revenue sources, such as “Dine-in” and “Carryout” service.

1. In the Admin Console’s Main Menu, click Location Setup, then click Rooms.
2. In the Rooms screen, select an existing room where conditionally taxed items may be ordered.
   In this example, we select a room where alcoholic beverages are commonly ordered (“Bar”).
3. In the Room’s setting panel, click the Taxes list and select the location’s non-conditional global tax (“Sales Tax”).
   The Taxes list only appears in the Room settings if you enable room-level taxes in the Location Settings screen.
4. In the Sales Tax’s Rate box, enter the percentage amount of the tax.
   Do not select the Sales Tax’s Override check box or any tags in the Tag list.
   
5. Click the Create or Select a Tax list, and select a tax for conditional items (“Alcohol Tax”).
6. In the Alcohol Tax’s Rate box, enter the percentage amount of the tax.
7. Select the Alcohol Tax’s Override check box.
8. In the Alcohol Tax’s Tag list, select the tag associated with the tax (“Alcohol”).
   
9. Click Save to save the room’s new tax settings.
   

Later, in the POS, if a server opens a ticket in this room and orders an item that has the “Alcohol” tag, the POS will automatically override the “Sales Tax” of 5.0% and apply the “Alcohol Tax” of 10.0% to the item.

Some locations may want to define alcoholic items as tax inclusive, in which an item’s tax is combined with the item’s price and hidden on the receipt. When configuring a location to use tax inclusive items, you may need to configure certain rooms to apply taxability overrides to certain items in certain circumstances. For more details on creating and using tax inclusive items, review the section on “Tax Inclusive Items”.

Advanced Tax Setup: Carryout Service

Some locations require taxes that only apply to menu items purchased under certain conditions, such as an “eat in” tax not applied to carryout orders. In such environments, you can define a conditional room-level tax that effectively withholds any tax amount from specific items ordered in a specific room.

In the following procedures, we describe how to configure the POS to apply a conditional tax with zero amount, instead of the global “Sales” tax, to items ordered within a room where sales taxes do not apply, such as a room representing carryout service. (In these procedures, we assume you have already enabled the location to use room-level taxes.)

Define a New Conditional Tax with Zero Amount

To set the POS to withhold a global “Sales” tax from items ordered within a specific room, you must define a tax record with a default amount of “0.000”. In other words, create a tax record called “No Tax” record that applies a tax of zero percent to the items in the ticket.

1. In the Admin Portal’s Main Menu, click Account Menu, then click Taxes.
2. In the Taxes screen, click New.
3. In the New Tax panel, in the Name box, enter “No Tax”.
   
4. Click Save to save the newly created tax.
   

Later, you will configure the room that represents “Carryout” service to override the global “Sales Tax” with this conditional “No Tax”. In effect, instead of applying a tax of 5% to items purchased in the “Carryout” room, the POS will apply a tax of 0%.

Define a Tag for the “No Tax” Tax

As with any conditional tax, you must define a tag for the “No Tax” tax.

1. In the Admin Console’s Main Menu, click Account Menu, then click Tags.
2. In the Tags screen, click New.
3. In the New Tag panel, in the Name box, enter a descriptive name for the tag (“No Tax”).
4. In the Tag Color list, select a color for the new tag.
5. In the Assigned Items list, select a menu item that the tag’s associated tax will apply to.
   You should include every menu item that should not have sales tax applied when ordered for carryout service.
6. Repeat Step 5 until you have added every menu item that will receive the tag’s tax to the Assigned Items.
   
7. Click Save to save the newly created tag.
   

Configure a Room to Use the “No Tax” Tax

After defining the tax and tag records for “No Tax”, you can set the “Carryout” room (or any other applicable room) to use them.

1. In the Admin Console’s Main Menu, click Location Setup, then click Rooms.
2. In the Rooms screen, select the room representing the location’s “Carryout” service, or any other room that will use the “No Tax” conditional tax.
3. In the Room’s setting panel, click the Taxes list and select the location’s global tax (“Sales Tax”).
4. In the Sales Tax’s Rate box, enter the percentage amount of the tax, and do not select the Sales Tax’s Override check box or any tags in its Tag.
   
   When configuring rooms representing “Dine-In” service, or any other rooms where the global tax will be applied to all items, you should only add the “Sales Tax” and then save the room’s settings.
5. Click the Create or Select a Tax list, and select No Tax.
6. In the No Tax’s Rate box, enter “0.000”.
7. Select the No Tax’s Override check box.
8. In the No Tax’s Tag list, select the “No Tax” tag.
   
9. Click Save to save the room’s new tax settings.
   

Later, in the POS, if a server opens a ticket in the “Carryout” room and orders an item that has the “No Tax” tag, the POS will automatically override the “Sales Tax” of 5.0% and apply the “No Tax” of 0.0% to the item. In effect, the POS will apply no tax to the item and will display no tax amount for the item in the receipt.

Room-Level Taxes: Considerations

If you enable a location to use room-level taxes, you must assign at least one default tax to every room. A default tax is a room-level tax with no tags or specified overrides. (In the earlier examples, we used “Sales Tax” as a default tax.) The POS will not only apply this tax to any items not specified in any tax/tag combinations, but also taxable gratuities and taxable positive adjustments.

If you only define room-level taxes associated with tags, the POS will not apply taxes to gratuities and positive adjustments, even if all items on the menu are assigned to a tag. If no taxes are applied by a room, the POS will charge all configured taxes on every item. We do not recommend this.

If desired, you can use more tax/tag combinations to separate taxes out further for reporting purposes. For example, if a location wants to track Food, Beverage, and Retail taxes separately, you can define an appropriate tax/tag combination for each category and ensure all rooms are set up properly with the correct default tax (whichever tax should apply to their adjustments and gratuities).

Once your room-level taxes are configured, if you change a ticket’s room, the POS will apply the tax rules of the new room to the ticket.

Taxable Adjustments

If you want to make an adjustment taxable, you must configure the adjustment’s settings in the Adjustment screen.

1. In the Admin Portal’s Main Menu, click Account Menu, then click Adjustments.
2. In the Adjustments screen, select an adjustment that you want to make taxable.
3. In the adjustment’s settings panel, clear the Apply Post-tax check box.
   
   If you select the Apply Post-tax box, the POS will apply this adjustment after calculating taxes. This adjustment will not change the original tax amount.
   If you clear the Apply Post-tax box, the POS will apply this adjustment before calculating taxes.
4. Click Save to save the adjustment’s setting.
   

Tax Inclusive Items

If your location uses tax inclusive menu items, you can set the POS to override the status of tax inclusive items when they are ordered within a certain room. For example, a restaurant that serves alcohol may want to apply taxes differently to liquor items depending on which room they are ordered in or whether the ticket includes only liquor items or a mix of liquor and food items.

Override Taxability for Tax Inclusive Items

You can configure the POS to respect or override the taxability of tax inclusive items by adjusting a room’s Override Taxability for Tax Inclusive Items setting the Rooms screen. 

1. In the Admin Console’s Main Menu, click Location Setup, then click Rooms.
2. In the Rooms screen, select an existing room.
3. Select an appropriate setting in the Override Taxability for Tax Inclusive Items.
   The Override Taxability for Tax Inclusive Items list enables you to set the POS to override the taxability status of tax inclusive menu items ordered within a room. If you select Off, the POS will not override the status of any tax inclusive items. The POS will include their taxes in the item’s price and will not display the tax amounts on receipts.
   
   If you select Taxable if any other items are taxable, the POS will override the status of any tax inclusive items only if the ticket also includes other items that are not tax inclusive. If the ticket includes such items, the POS will separate the tax from each tax inclusive item’s total and display it on receipts, just like the other taxable items.
   
   If you select Always taxable, the POS will override the status of all tax inclusive items on the ticket and apply taxes to their totals like regular taxable items. The POS will separate the tax from each item’s price and display the total taxes at the bottom of the receipt.
   
4. Click Save to save the room’s new setting.
   

Tax Inclusive Item Reporting

While the POS does not display the taxes for tax inclusive items in receipts, the Admin Console does list tax totals from tax inclusive items in the Daily Summary Report. In the Daily Summary Report screen, in the Sales section, the report lists separate totals for inclusive and non-inclusive taxes. If you double-click the Taxes or Taxes (inclusive) row in the Report, the program will open a panel displaying a summary of the taxes collected.

You can also review inclusive tax totals in the Taxes Report, which you can filter to display transactions by staff member. The program will list taxes from tax inclusive items affected by the Override Taxability setting in the Collected column, since the taxes were paid by the customer rather than backed into the price of the item.