 Here we are in our custom zero home page going into the new company file we set up in a prior presentation. That being get great guitars, continuing on with the process of entering those beginning balances as well as those foundational items necessary to make data input and the normal accounting process as easy as possible. This time we want to talk about sales tax as though we're in the United States. However, the sales tax is basically a kind of usage tax. So if you have a tax that needs to be collected when you're making a sale, this is gonna be that type of concept. In the United States, the major federal tax is the federal income tax. And then on the state level, that's usually when the sales tax comes into play on state and local levels. That means the sales tax could change as we go around in the United States. So we're gonna practice kind of our generic sales tax problem then turning on the sales tax. Now, there's a couple of things we wanna keep in mind with the sales tax. When we turn on the sales tax, we have to think about one, setting up the sales tax, making sure we set it up properly for the location that we are in. And then two, applying the sales tax to when we make sales with invoices and money in forms. And we do that with the sales tax items primarily and then three, we might have customers that are exempt from the sales tax. So then we can change the customer settings in the event that they might be exempt, say from a sales tax. So the general idea would be that whenever we make a sale, we would do so with an invoice or receive money item. And if we have the total down here, if I add an item, let's just add an item and say we've got this one here, if this is subject to sales tax, what we would like to see happen is the sales tax being calculated. So if this was a $500 guitar that we're selling, we would like to be tacking on whatever the sales tax is, collecting the sales tax so that we can charge the client for the full amount including the sales tax and then hopefully have the system to properly track the sales tax so that we can then pay the sales tax in accordance to whatever payment schedules we have to do that. All right, so I'm not gonna actually record this invoice so let's cancel this one and let's think about the sales tax process to be setting up. So if we go into the accounting up top, we're gonna go into advanced. Within the advanced, we've got the tax rates on the right hand side. And then within this section, it says getting started with tax rates. So every transaction line item you enter into zero needs a tax rate, the tax rates you use will depend on the location of your organization. So generally the software is getting better and better at being able to basically get the right tax rate based on the location, which is great. So tax rates can have multiple tax components. For instance, you can have an item that is charged a tax rate called the tax on goods, 8.75% that has two components, a state tax of 7.75 and a local tax of 1%. So the sales tax can get somewhat complicated. If you're in the United States, for example, you could have the state tax and the local tax that are basically combined together for that same location that would be the sales tax. And then you can generate reports on any tax rate and tax components. If you need to report an income separately to expenses or capital purchases separately to expenses, then you should create a separate tax rate for each. So we have the tax options down here. Now normally you would wanna go into the sales tax lookup where it says here lookup rates for when invoicing customers. So you got the sales tax lookup and then you have your physical address and you basically, it can help you to calculate the actual tax rate based on your physical address, which is great. That's usually the way you would want to go. Note that if you're doing online sales, then it gets a little bit more complex because then you have to determine whether, because usually the sales tax is gonna be subject to your location. So in the United States, multiple states and localities are gonna have different sales tax. So then the question is, well, what if you're selling stuff on an e-commerce situation, then where are you subject to sales tax on your home base or on the places where you're actually making the sale and then who's responsible for the sales tax? If you're selling on other platforms like an Amazon or something like that, you have questions of who's responsible for the sales tax. So if you have multiple areas where you're subject to sales tax, it gets a little bit more complex. For our practice problem here, we're gonna use a generic sales tax because we wanna keep it kind of generic because again, sales tax even in the United States is different from place to place. So we wanna get the concept of how a usage tax like a sales tax would work. So let's go down to the tax rates and put like a generic tax rate down here and we're gonna have tax on sales. So I wanna go into the tax on sales and then I'm gonna say a generic 5%. So I'm just gonna make up a generic 5% tax on sales and just note that I made another component down here just so we could see that. So like you could have tax on sales for California and then you could have sales tax local or something like that. And it would let's make it add up to 5%, four and one. Or let's say, so you might have multiple components that you're subject to sales tax based on your location. So I'm gonna say, let's save it and then I'm gonna check that off. That's gonna be the tax on sales. I'm not gonna have any tax on purchases. And so I'm not gonna put anything there but you have the option for tax on purchases if you're subject to that as well. And so let's go ahead and save that and then let's check it out. So let's just test it out. If I go, well, first then the next step before I enter an invoice is to go to our items and choose the items that are subject to tax. So possibly not every item is subject to tax. So the items are the things that we're selling. So if we go into our business up top, products and services and we check out our items. Now I'm gonna imagine that the items subject to sales tax will be the inventory items and not the service items. So we're only gonna have to deal with sales tax with the inventory items. So I'm gonna go into each of the inventory items and then edit the inventory item. And I wanna say that it's subject to sales tax. Now this would be a great thing to have had available when we set up the items, but I wanted to do it separately because of course the sales tax is kind of a whole burden in and of itself which I wanna put a whole another presentation on. But you might, it might have been good to do it the other way around, right? Set up the sales tax and then set up your items so that when you set up the items you would then say whether or not they're subject to the sales tax. But in any case, I'm gonna say the sales tax is on, save it and then let's go back to our products and services. That was the ukulele. I'm gonna do that for each one of these. So we're gonna go into the Gibson USA. Let's edit that item and turn on the sales tax. Tax on the sale.