If you’re aware of an upcoming tax rate change, you can follow these steps. As a reminder, it is your obligation to ensure your compliance with all applicable laws and regulations.
For tenants who moved in before the first day of the upcoming month, where the upcoming month has the new tax rate applied:
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Update the sales tax rate for each tenant record after the previous month’s invoice (with the previous tax rate) has been created and before the next month’s invoice is created.
Please note: Invoices are created for each tenant based on the number of days in the Billing Period field in Setup > Settings (learn more in our help article). The invoice creation date will be the same for all tenants with First-of-Month billing, but will vary with Anniversary billing, where invoices can be generated on any day of the month.
For tenants on First-of-Month billing, you can void an invoice that has already been generated prior to the first of the month. After voiding it, update your sales tax rate. Your software will generate a new invoice during overnight processing.
- On the first day of the month when the new tax rate takes effect, but before any rentals are made, go into each unit type and adjust the sales tax rate.
What happens if the invoice has already been created?
Wait until the tenant has paid their bill, and calculate the amount of extra or insufficient sales tax you collected:
- When extra sales taxes are collected (when the new tax rate is lower than the previous rate), issue a future credit for this amount on their account.
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When not enough sales taxes are collected (when the new tax rate is higher than the previous rate), create a fee for this amount on their account.
When deciding on your approach, keep in mind that adding a tax charge (and being able to collect the tax from your tenant) after the fact may not be possible via your software if the tenant has already moved out or is no longer listed in the system.
- Please note: Tax collected will be represented incorrectly for tenants who are adjusted after paying their bill. You will need to manually adjust this in your accounting software.