Understanding tax configuration by date range

Grouping taxes by date range (Effective Date) enables the system to calculate the proper taxes for future reservations in the event there is a scheduled tax requirement change and to correct past tax invoices with the correct tax rates when tax requirements change after the creation of an invoice.

Note: Grouping taxes based on the effective date is required in countries where Value added tax (VAT) and/or Goods and services tax (GST) are assessed.

These scenarios show additional information on tax configuration by date range:

Scenario 1: Based on a United Kingdom (UK) government mandate, the VAT rate will increase from 2.0% to 2.2% on 01/12/2012. As a result, room rates for reservations made for hotel stays following the tax increase must be quoted using the 2.2% VAT. To support this tax increase, a hotelier can create a UK tax group and configure the VAT tax of 2.2% to begin 01/12/2012 with no ending date.

Scenario 2: A guest stayed at a UK hotel during December 2011 and then the UK VAT tax is changed from 2.0% to 2.2% on 01/12/2012. Following the tax increase, the hotel discovers that the guest's tax invoice needs to be corrected. In response, the hotel issues a correction invoice in the system using the 2.0% tax group configuration that was in effect during the guest stay to correct the taxes.

Value added tax is a consumption tax levied on only the value added to a product, material, or service. The value added to a product consists of the sale price charged to the customer less the cost of materials and other taxable inputs. The manufacturer or provider of the product pays taxes on the difference between the item cost and the value added, and retains the remainder as compensation for taxes already paid on the materials. VAT is similar to sales tax in that tax is paid by the customer, but sales tax is paid only once at the point of purchase, while VAT collection, payments, and credits for taxes paid occur every time that a value added product is purchased.
Goods and services tax is a type of VAT that enables businesses to claim deductible tax credits for the purchase of goods and services that are consumed in conjunction with the products or services they provide during a specified period. Ultimately, the GST is paid by the end consumer, which prevents multiple applications of the GST on the same goods or service during the process of delivering the product or service from multiple businesses to the end consumer.