Sales Tax

This page explains how sales tax flows through Backbone — from a single company-wide default rate, down through each customer and order, to the tax line that appears on an invoice. It also covers the two exceptions that decide whether tax actually applies: non-taxable parts (per line item) and taxed vs. non-taxed customers.

The big picture

Tax is resolved in a chain, and each step can override the one before it:

Your company has a single Default Sales Tax Rate (a percentage) in Company Settings.
Each customer is either taxed or not taxed, and may optionally carry its own rate that overrides the company default.
When you create an order, it inherits the effective rate for that customer and stores it as the order's tax rate.
Each line item on the order is marked Taxed or not, based on whether its part is flagged non-taxable.
When you generate an invoice, Backbone adds a single Tax line for the taxable items at the order's rate.

Rates are entered as percentages. Type 8.25 to mean 8.25%, not 0.0825. This is true everywhere you enter a rate — the company default and the per-customer rate.

1. The company default sales tax rate

Set your company-wide default on the Edit Company Settings page, in the Default Sales Tax Rate (%) field. This is the fallback rate used for taxed customers who do not have their own rate. Leaving it blank (or 0) means your company has no default tax rate configured.

Company admins edit it in the web portal; see Edit Company Settings.

Go to your company's Settings page ↗

When does the default get used? Only for a customer who is marked taxed and has no rate of their own. A non-taxed customer never picks up the company default (see below).

2. Taxed vs. non-taxed customers & their default rate

Every customer carries a taxed setting and an optional Sales Tax Rate (%), both on the customer's Settings tab in the Customer Editor.

Apply sales tax to this customer — the taxed gate. When on, the customer's orders are taxable; when off, tax is never applied to this customer regardless of the company default.
Sales Tax Rate (%) — an optional rate that applies to this customer only. Leave it blank to fall back to the company default.

How a new customer starts out

When a customer is created, Backbone sets the taxed gate automatically: if your company has a non-zero Default Sales Tax Rate configured at that moment, the new customer is marked taxed; if no company default is set, the new customer starts not taxed. You can change this at any time on the customer's Settings tab.

Changing the company default later does not retro-actively re-tax existing customers. The taxed gate is decided when each customer is created (and whenever you edit it). If you add a company default after some customers already exist, open those customers and turn on Apply sales tax for the ones that should be taxed.

How a customer's effective rate is chosen

For a given customer, the rate is resolved in this order:

If the customer has an explicit Sales Tax Rate, that rate is used — even if the taxed gate is off-by-default elsewhere, an explicit rate always applies.
Otherwise, if the customer is taxed, the company default rate is used.
Otherwise (not taxed, no explicit rate), the effective rate is 0 — no tax.

Open the web portal ↗

In the desktop app you can jump straight to your Customers list to open a customer and edit these settings.

3. The order tax rate

When you create a new order for a customer, Backbone resolves that customer's effective rate (using the chain above) and stores it on the order. You can see it as the Tax % value on the top row of the Order Editor. This is a snapshot: the order keeps the rate it was created with, so later changes to the customer or company default do not silently alter existing orders.

Ship-location override. If the order's ship-to location has its own sales tax rate, that location rate takes precedence over the customer/company chain for the order.

Jump to your open orders in the desktop app.

4. Taxable vs. non-taxable parts (per line item)

Having a tax rate on the order is only half the story — each line item is individually marked as taxed or not, so a single order can mix taxable and tax-exempt items. This is driven by the part:

A part can be flagged Non-taxable in the Part Editor.
When a part is added to an order line, that line is marked Taxed unless the part is non-taxable. A part with the non-taxable flag off (or never set) is treated as taxable.

The Order Editor's line-item table has a read-only Taxed column showing Yes for taxable lines and blank for exempt lines, so you can see at a glance which items will be taxed.

Exception summary: non-taxable parts are excluded from tax even on a taxed customer's order. Tax is only charged on lines whose part is taxable.

5. Tax on invoices

When you generate an invoice from a shipment, Backbone adds a single Tax line item to the invoice. Its amount is the order's tax rate applied to the total of the taxable items on that invoice — non-taxable-part lines are left out. The tax line is included in the invoice total like any other line.

No tax line is added when either of these is true:

the order's tax rate is 0 (for example, a non-taxed customer with no rate), or
nothing on the shipment is taxable (every item's part is non-taxable).

Partial shipments. Because an invoice is created per shipment, the tax is computed from the items actually on that invoice. If an order ships in several shipments, each invoice carries the tax for just its own taxable items.

Worked example

Suppose your company default is 8.25%. You create a new customer — because a default exists, they start taxed with no rate of their own, so their effective rate is the 8.25% company default. You place an order; it stores 8.25% as its tax rate. The order has two lines: a taxable widget ($100) and a non-taxable service fee ($40). The service line shows blank in the Taxed column; the widget shows Yes. When you ship and invoice, the invoice gets a Tax line of $8.25 (8.25% of the $100 taxable item only), and the service fee is untaxed.

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