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Adding Multiple Tax Rates to an Invoice

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You can apply a different tax rate to each line item on an invoice, so every service or product is taxed correctly. This article shows you how to add, edit, and remove custom tax rates on line items, and what happens when you add an item to an invoice that has its own tax rate.

In this article:

Before You Begin

  • Available on all plans: You can use multiple tax rates on an invoice on any Practice Better plan. These steps apply when you edit an individual invoice.
     
  • Your default tax rate applies first: Each invoice starts with the default tax rate you set in Settings (gear icon) > Invoices & Payments. Learn more in Configuring Invoice, Currency, and Tax Settings →
     
  • Line item taxes replace the invoice-level tax: An invoice uses either one tax rate for the whole invoice or a tax rate on each line item. When you add tax to a line item, you can no longer add tax at the invoice level.
     
  • Zero percent on one line item affects the rest of the invoice: Because a line item tax replaces the invoice-level tax, adding a 0% tax to the first line item leaves the other line items untaxed. If you want the whole invoice untaxed, remove the tax at the invoice level instead.
     
  • Your Practice Better subscription tax is separate: The tax on your own Practice Better subscription invoices is not part of this article. Learn more in Sales Tax for Practice Better Billing FAQ →

Adding a Custom Tax Rate to a Line Item

  1. Open the invoice you want to edit, or create a new invoice. Learn more in Creating and Managing Invoices in Practice Better →
     
  2. Enter the line item description and fee.
     
  3. Click the pencil icon next to the line item.
     
  4. Click Add tax.

     
  5. In the pop-up, enter a name and a percentage for the tax rate.

     
  6. Click Save.
     
  7. After making changes, Save the invoice.

After you save, a prompt tells you the invoice now has multiple tax rates enabled. 

If the invoice had an invoice-level tax rate and other line items, Practice Better removes the invoice-level tax rate and applies that rate to the invoice's other existing line items.

📍 Note: Line items you add after this point do not have a tax rate until you add one. Add tax to each new line item that needs it.

Practice Better calculates each tax and displays the totals at the bottom of the invoice. When the invoice is ready, process the payment or send it to your client. Learn more about Processing Payments with Practice Better Payments →

Editing or Removing a Line Item Tax Rate

  1. Open the invoice and click the pencil icon next to the line item.
     
  2. To change the tax, click Edit tax, update the name or percentage, and save.

     
  3. To remove the tax, click the x next to the tax rate in the line item.

     
  4. After making changes, Save the invoice.

Returning to One Invoice-Level Tax Rate

To go back to a single tax rate for the whole invoice, remove the tax rate from every line item. The invoice then returns to using one invoice-level tax rate that you can set.

Adding Items That Have Their Own Tax Rate

A service, package, or program can have its own tax rate that overrides your default. You set it in the Advanced Options tab of that service, package, or program. Custom supplements do not have a tax override setting.

What happens when you add one of these items to an invoice depends on how the invoice is taxed:

  • The invoice already has line item taxes: The item's own tax rate applies to its line item. No pop-up appears.
  • The invoice has an invoice-level tax rate: A pop-up asks how to apply the item's tax rate. Choose one option and click Continue.
  • Add tax to this line item only: The invoice switches to line item taxes. Practice Better applies the item's tax rate to its line item and applies the original invoice-level rate to the invoice's other line items.
  • Update invoice-level tax: The item's tax rate replaces the invoice-level tax rate for the whole invoice.
  • Ignore tax: The original invoice-level tax rate stays on the invoice, and Practice Better does not apply the item's tax rate.

Using a Combined Tax Rate

Each line item holds one tax rate. If an item needs two taxes, such as GST and PST, create one combined rate. In the tax name field, enter a name such as GST + PST, and in the percentage field, enter the combined rate. Both fields accept any value you enter.

Reusing Tax Rates on Future Invoices

Practice Better does not save a custom tax rate you enter on an invoice, so you enter it again on each new invoice. To apply the same tax rate automatically, set it as your global default in your practice better Invoices & Payments settings. Learn more in Configuring Invoice, Currency, and Tax Settings →

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