How Bookkeep posts to Xero with Sales Tax

**This is supported with our Square, Shopify, SumUp, and Squarespace app integrations for Xero for countries except the United States

**We recommend you speak with your accountant and to the tax authorities you need to provide GST, VAT or sales tax returns to, so you know your obligations.

Xero is designed for reporting taxes in a single country. Xero offers functionality to enable tracking sales tax by leveraging tax rates within Xero. Xero provides various helpful articles on their tax rates: https://central.xero.com/s/article/How-sales-tax-works-in-Xero-US

https://central.xero.com/s/article/Run-the-Sales-Tax-report

https://central.xero.com/s/article/File-a-GST-VAT-or-sales-tax-return-in-another-country

Bookkeep offers sales tax posting into Xero by leveraging the tax rates setup within Xero which can be mapped to your sales summaries in Bookkeep. This allows sales data to be synced into Xero leveraging your mapped sales tax rates.

One thing to note when mapping your sales summaries is that you will have to select a tax rate from Xero that is your 0% rate for sales not taxable. This allows posting correctly to indicate the lines in the journal where sales tax did not apply. For some regions, Xero auto creates this rate e.g. "No VAT." Below is the sales summary mapping view example where you would select your zero rate:

As background, when we import data into our system we use categories and subcategories to display the journal entry lines that you can map to your accounts in your accounting platform.

Normally, subcategories are optional to be mapped, but for Xero sales tax rates, each line needs to be mapped or the posting to your Xero will fail. To better understand how we post your sales tax to Xero, please read on with an example below.

**NOTE: If you need to refresh the tax rates from Xero or have added new tax rates in Xero that you need imported into Bookkeep, please refer to here for refreshing your accounts from Xero: https://knowledge.bookkeep.com/refreshing-your-accounting-accounts

We take the tax collected explicitly from the source system (Square, Shopify, etc.) and then back into the revenue for that tax collected. We do not allow Xero to calculate the tax for you. 

From the mapping view for the sales summary, you can see the subcategories for the sales tax collected as shown below. Each subcategory needs to be mapped to a tax rate from Xero or else the entry will not post:

If any tax rate is missing, you can create the rate in Xero and refresh in Bookkeep to pull in any new rates. New rates can be created from the tax view in Xero as shown below:

Once you have mapped all of your sales tax subcategories like shown below, Bookkeep can post these journal entries:

Finally, below is an example journal entry (**Example Entry) with sales tax using the Xero tax rates mapped. Bookkeep posts all amounts on a tax exclusive basis into accounting.

You will see lines 1-8 post the normal journal entry that Bookkeep completes. Lines 9-13 show the booking of the sales tax based on the amount collected and backing into the associated revenue. For example, the original entry had 17.96 collected for the 9.975% tax rate. Therefore, 17.96 divided by 0.09975 equals 180.05 taxable revenue which is present on line 13 of the example entry at the bottom.

Lines 9-13 in the image at the bottom have the corresponding mapped sales taxes from Bookkeep populated in the Tax Rate column. The remaining lines leverage the Zero Tax Rate that was mapped above.

Finally, line 14 backs out the taxable revenue amounts from lines 9-13 connected to sales tax. This means that the Bookkeep sales tax clearing account used in lines 9-14 will always net out to zero while having all sales tax collected recorded in the appropriate mapped tax rate.

At the bottom of the entry, the sales tax collected is present based on the mapped tax rates allowing Xero to capture sales tax correctly:

**Example Entry:

If you have any questions on how Bookkeep posts sales tax to Xero, please contact support@bookkeep.com.