How taxes are set up and calculated

Tax is the part of an invoice nobody wants to think about and everybody needs to be right. Here is where the rates live, how they land on documents, and exactly how the math works.

Set up your tax rates

Go to your company profile and open the Business & Tax tab. The Tax Options card holds your rates:

• Add Standard Tax Rates offers the official rates for your country and region (for example GST + PST for British Columbia). Click Add on the ones you charge.
• Add Custom Tax creates your own: give it a Tax Name and either a Simple Rate (%) or Components (for example State 4% plus County 1.5%, forming one combined rate).

WorkZen seeds sensible rates for your region when your company is created, and a zero rate always exists for tax-exempt work; it cannot be removed. Some regions ask you to confirm the checkbox that your rates align with your jurisdiction.

Tax applies per line item

There is no single tax switch for a whole document. Each line item carries its own Tax Rate, chosen in the item editor from your company's rates, or Excluded (0%) for exempt lines. Different lines can carry different rates on the same invoice.

Where a line's rate comes from:

Set the right rate on your price book items once, and every document that uses them is correct automatically.

How the math works

Prices are always tax exclusive: tax is added on top, never backed out of your price.

1. Each line's pre-tax amount is quantity times unit price.
2. Tax is calculated per line. For compound rates, each component (say GST 5% and PST 7%) is calculated and rounded to the cent separately, then summed; this per-component rounding is what tax authorities require.
3. A document discount reduces the taxable amount proportionally, so tax is effectively charged on what the client actually pays. Percentage discounts are rounded once, on the full subtotal.
4. Tips and processing fees are added after tax and are never taxed.

The document then shows a Tax row with the total, and an indented sub-line per component (GST, PST, QST, HST, State Tax, Local Tax) so your client sees exactly what was charged. All amounts are calculated in cents, so the printed breakdown always adds up to the tax total, to the cent.

For the rest of your money defaults (payment terms, document numbering, tips), see financial settings.