Value added tax (VAT), goods and services tax (GST) and sales tax are all taxes that a business collects from its customers and passes on to the government. They affect how an invoice looks. The rules vary a great deal by country, so this is a guide to the ideas, not a ruling.
Who charges it
Most countries only require you to charge VAT or GST once your sales pass a registration threshold, though you can often register earlier. If you are registered, you add the tax to your prices, show it on your invoice and pay it over to the tax authority regularly. If you are not registered, you do not charge it, and you should not show it.
What it looks like on an invoice
A registered business normally shows:
- Its tax registration number.
- The price before tax, the tax rate, the tax amount and the total including tax.
- Tax per line if different items carry different rates, such as a standard rate and a lower or zero rate.
- For sales in the United States, the sales tax charged, where it applies in that state.
Prices with and without tax
Business customers usually think in prices before tax, because they can often reclaim the tax. Consumers think in prices including tax. When you quote, say which you mean. Our VAT and GST Calculator works in both directions: it adds tax to a price, or takes it out of a total.
Customers in other countries
Selling to customers abroad can change which tax applies. Some sales are zero-rated or outside the scope of the tax, and some require the customer to account for it. These rules are specialised, so check with your tax authority or an adviser before you sell across borders.
Get the totals right
Rounding matters. Work out the tax on each line, or on the total, in the way your tax authority expects, and be consistent. Our invoice generator lets you name the tax, set the rate and have the sums done for you, so the totals always add up.
When in doubt, ask
Tax rules change, and a mistake can be expensive. A short conversation with an accountant, or a look at your tax authority's website, is worth the time. Our templates are general and are not tax advice.
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These guides are general information to help you get paid and stay organised. They are not legal or tax advice. Rules differ by country and change over time, so check with your tax authority or an adviser.