## Documentation Index

Access the complete documentation index at:
https://www.zoho.com/ca/books/help/llms.txt

Use this file to discover all available documentation pages before proceeding.

# Taxes

Every business in Canada is required to collect and remit taxes such as GST, HST, PST, QST, or RST, depending on the province in which it operates. In Zoho Books, you can configure tax rates, tax groups, exemptions, and agencies to meet the tax requirements of your business and apply them automatically to your transactions.

## Enable Tax

If your business is registered to collect and remit taxes, you can enable taxes in your Zoho Books organisation. To enable tax:

*   Go to **Settings**.
*   Navigate to _Organization Settings_.
*   Select **Taxes** under _Taxes & Compliance_.
*   Click **Enable Tax** to enable taxes for your organisation.
*   Click **Save**.

![Enable Tax](/ca/books/help/images/settings/taxes/enable-taxes.png)

Taxes will now be enabled for your organisation.

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## Set Up Tax Registration

Tax registration allows you to set up the taxes applicable to your business based on your location and legal requirements. This ensures that taxes are calculated correctly in your transactions and helps you stay compliant with regulations.

To set up tax registration in your Zoho Books organisation:

*   Go to **Settings**.
*   Navigate to _Organization Settings_.
*   Select **Taxes** under _Taxes & Compliance_.
*   Navigate to _Tax Registration Settings_ and click **\+ New Tax Registration**.
*   In the _New Tax Registration Settings_ page, enter the required details to set up your tax registration:
    *   Select the **Jurisdiction Tax/State** for which you are registering for tax.
    *   The **Tax Registration Label** will be auto-selected.
    *   Enter the **Tax Registration Number.**
    *   Select the **Tax Registration Date**.
*   Click **Save**.

![Set Up Tax Registration](/ca/books/help/images/settings/taxes/tax-registration.png)

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## Configure Tax Returns

A tax return is a report that businesses or individuals submit to a tax agency to declare the taxes they have collected, paid, or owe for a specific tax period.

In Zoho Books, you can configure tax returns based on the provinces where your business is registered to collect and remit taxes. Once configured, you can generate the relevant tax return reports for a selected period and mark them as filed after submitting them to the respective tax agency.

You can configure the following tax returns in your Zoho Books organisation:

*   [Goods and Services Tax (GST) / Harmonized Sales Tax (HST) Return](https://www.zoho.com/ca/books/help/canada-tax/gst-hst-return.html)
*   [British Columbia Provincial Sales Tax (BC PST) Return](https://www.zoho.com/ca/books/help/canada-tax/bc-pst-return.html)
*   [Quebec Sales Tax (QST) Return](https://www.zoho.com/ca/books/help/canada-tax/qst-returns.html)
*   [Manitoba Retail Sales Tax (MB RST) Return](https://www.zoho.com/ca/books/help/canada-tax/mb-rst-return.html)
*   [Saskatchewan Provincial Sales Tax (SK PST) Return](https://www.zoho.com/ca/books/help/canada-tax/sk-pst-return.html)

To configure tax returns:

*   Go to **Settings**.
*   Navigate to _Organization Settings_.
*   Select **Taxes** under _Taxes & Compliance_.
*   Navigate to _Tax Return Settings_.
*   Click **\+ New Tax Return Settings.**
*   In the _New Tax Return Settings_ page, enter the following details:
    *   Select the **Jurisdiction Tax/State** for which you want to configure tax returns. Only the tax registrations that have been set up in your organisation will be available for selection.
    *   Click the _Reporting Period_ dropdown and select whether you want to generate the return **Monthly**, **Quarterly**, or **Yearly**.
    *   Select the date from which you want to generate the return in the **Tax Return Start Date** field.
    *   Click the _Tax Basis_ dropdown and select whether you want to generate the return on an **Accrual** or **Cash** basis.
*   Click **Save**.

![Configure Tax Returns](/ca/books/help/images/settings/taxes/tax-returns.png)

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## Tax Rates

In Zoho Books, you can add a new tax rate, edit an existing one, mark a rate as inactive, or delete a rate that is no longer needed.

### Add a New Tax Rate

To add a new tax rate:

*   Go to **Settings**.
*   Navigate to _Organization Settings_.
*   Select **Taxes** under _Taxes & Compliance_.
*   Navigate to **Tax Rates**.
*   Click **\+ New Tax** in the top-right corner.
*   In the _New Tax_ page, fill in the following fields:
    *   **Tax Name:** Enter a name for the tax.
    *   **Rate (%):** Enter the percentage at which the tax must be applied.
    *   **Tax Agency:** Select the tax agency to which this tax will be remitted, or type a new name to create one.
    *   **This is a value added tax:** Check this option if the tax can be reclaimed from the tax authority.
    *   **This tax is a compound tax:** Check this option if the tax should be calculated on top of another tax (the item or invoice amount plus another tax, such as GST).
*   Click **Save**.

![Add a New Tax Rate](/ca/books/help/images/settings/taxes/new-tax-rate.png)

The new tax rate will now be added and listed under _Active taxes_.

### Edit a Tax Rate

To edit an existing tax rate:

*   Go to **Settings**.
*   Navigate to _Organization Settings_.
*   Select **Taxes** under _Taxes & Compliance_.
*   Navigate to **Tax Rates**.
*   Click the _More_ icon next to the tax rate that you want to edit, then select **Edit** from the dropdown.
*   In the _Edit Tax_ pane, make the necessary changes.
    *   If the tax has already been applied to existing transactions, you’ll be prompted to confirm whether the updated rate should be applied to those transactions as well. Select the existing transactions you want to update.
    *   Check the **I accept that updating the tax will mark the existing tax inactive, create a new one, and update it in chosen transactions** option.
*   Click **Save**.

![Edit a Tax Rate](/ca/books/help/images/settings/taxes/edit-tax-rate.png)

The tax rate will be updated.

### View Associated Records of a Tax Rate

To view the associated records of a tax rate:

*   Go to **Settings**.
*   Navigate to _Organization Settings_.
*   Select **Taxes** under _Taxes & Compliance_.
*   Navigate to **Tax Rates**.
*   Click the _More_ icon next to the tax rate whose associated records you want to view, then select **View Associated Records** from the dropdown.

![View Associated Records](/ca/books/help/images/settings/taxes/view-associated-records.png)

In the _Associated Records_ panel on the right, you can view all records associated with the tax rate.

### Mark a Tax Rate as Inactive

To mark a tax rate as inactive:

*   Go to **Settings**.
*   Navigate to _Organization Settings_.
*   Select **Taxes** under _Taxes & Compliance_.
*   Navigate to **Tax Rates**.
*   Click the _More_ icon next to the tax rate that you want to mark as inactive, then select **Mark as Inactive** from the dropdown.

![Mark a Tax Rate as Inactive](/ca/books/help/images/settings/taxes/mark-as-inactive.png)

*   In the confirmation pop-up, click **OK**.

The tax rate will be marked as inactive.

### Delete a Tax Rate

To delete a tax rate:

*   Go to **Settings**.
*   Navigate to _Organization Settings_.
*   Select **Taxes** under _Taxes & Compliance_.
*   Navigate to **Tax Rates**.
*   Click the _More_ icon next to the tax rate that you want to delete, then select **Delete** from the dropdown menu.

![Delete a Tax Rate](/ca/books/help/images/settings/taxes/delete-tax-rate.png)

*   In the confirmation pop-up, click **OK** to delete the tax rate.

**Note:** A tax rate that is associated with existing transactions cannot be deleted. You’ll have to remove or update those transactions before you delete the rate.

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## Tax Exemptions

Tax exemptions allow you to exclude eligible customers or transactions from sales tax. You can create tax exemptions based on exemption categories such as resale, non-profit organisations, or other tax-exempt statuses supported in your jurisdiction. To create a tax exemption:

*   Go to **Settings**.
*   Navigate to _Organization Settings_.
*   Select **Taxes** under _Taxes & Compliance_.
*   In the _Taxes_ pane, select **Tax Exemptions**.
*   Click **\+ New Tax Exemption** in the top right corner.
*   In the _New Tax Exemption_ pop-up, fill in the following fields:
    *   **Exemption Reason:** Enter the reason for the tax exemption.
    *   **Description:** Provide a description of the exemption.
    *   **Type:** Choose whether the exemption applies to a Customer or an Item.

![New Tax Exemption](/ca/books/help/images/settings/taxes/tax-exemption.png)

*   Click **Save**.

Now that you’ve created the tax exemption, you can associate it with a customer or apply it to transactions for items.

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## Tax Agency

A tax agency is the government body responsible for administering and collecting taxes. In Zoho Books, you can create tax agencies and associate them with tax rates to help track tax liabilities and ensure taxes are reported correctly.

To create a tax agency:

*   Go to **Settings**.
*   Navigate to _Organization Settings_.
*   Select **Taxes** under _Taxes & Compliance_.
*   In the _Taxes_ pane, click **Tax Agencies**.
*   Click **\+ New Tax Agency** in the top right corner.
*   In the _New Tax Agency_ pop-up, enter the following details:
    *   **Tax Agency**: Enter the name of the tax agency.
    *   **Registration Number**: Add a registration number, if required.
    *   **Description**: Add a description, if required.

![New Tax Agency](/ca/books/help/images/settings/taxes/tax-agency.png)

*   Click **Save**.

Once the tax agency is created, you can associate it with tax rates while configuring taxes in Zoho Books.

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## Tax Override in Purchase Transactions

You can adjust the total tax amount in purchase transactions in Zoho Books by enabling the tax override option. This feature allows you to override the default tax amount to account for specific federal or provincial tax requirements, as tax rates may vary. To enable tax override:

*   Go to **Settings**.
*   Navigate to _Organization Settings_.
*   Select **Taxes** under _Taxes & Compliance_.
*   In the _Taxes_ pane, click **Tax Preferences**.
*   Check the **Enable Tax Override for purchase transactions** option.
*   Click **Save**.

![Enable Tax Override](/ca/books/help/images/settings/taxes/tax-override.png)

Now that you’ve enabled tax override for purchase transactions, you can modify the tax amount at the transaction level.

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## Tax Rules

Tax rules in Zoho Books are a set of criteria that determine the tax rates applied to transactions based on the provincial and federal tax rates established by the Government of Canada.

In Zoho Books, tax rules are created automatically based on the Tax Return Settings configured for your organisation. Initially, a default tax rule is created using the GST/HST tax rates applicable across Canada. Once you configure the tax returns for your business, the default tax rule is automatically updated based on the selected tax jurisdictions. The appropriate tax rates are then automatically applied to your transactions according to the default tax rule.

Tax rules assigned to specific customers or vendors are called Contact-Based Tax Rules. When you create a transaction for a customer or vendor with an associated tax rule, the applicable tax rate is automatically applied, regardless of your organisation’s location or the contact’s billing or shipping address.

Tax rules assigned to specific items are called Product-Based Tax Rules. These allow you to define different tax rates for an item based on the province in which the transaction takes place.

**Note:** This feature is available only for organisations created before 26 April 2026. Organisations created on or after this date can use [Sales Tax Automation](https://www.zoho.com/ca/books/help/settings/sales-tax-automation.html).

### Create Tax Rules

The tax rates in transactions are automatically filled based on the default tax rules. However, some customers, vendors, or items may require different tax treatment. In such cases, you can create additional tax rules and associate them as needed.

To create a tax rule:

*   Go to **Settings**.
*   Navigate to _Organization Settings_.
*   Select **Taxes** under _Taxes & Compliance_.
*   In the _Taxes_ pane, under _Advanced Tax Automation_, click **Tax Rules**.
*   Click **\+ New Tax Rule**.
*   In the _New Tax Rule_ page:
    *   Enter a **Tax Rule Name**.
    *   Select the **Association Type**:
        *   Choose **Contact-Based** to assign the tax rule to customers or vendors.
        *   Choose **Item-Based** to assign the tax rule to items.
    *   If you select _Contact-Based_:
        *   Select the _Transaction Type_ as **Sales** or **Purchases**.
        *   If you select _Sales_, choose your **Tax Preference**:
            *   If you select **Taxable**, select the applicable **Tax Rate (%)**.
            *   If you select **Tax Exempt**, select the **Exemption Reason** and **Tax Agency**.
        *   If you select _Purchases_, select the applicable **Tax Rate (%)**.
    *   If you select _Item-Based_:
        *   Select the _Transaction Type_ as **Sales** or **Purchases**.
        *   Select the **Country**. You can click **\+ Add New Country** to add a new country.
        *   Select the **State**. You can click **\+ Add New State** to add a new state to the selected country.
        *   In the **Tax Name** field, select the tax that you want to associate with the state.
*   Click **Save**.

### Associate Tax Rules with Customers and Vendors

To associate an exempt or special tax rule with a customer or vendor:

*   [Edit](https://www.zoho.com/ca/books/help/contacts/other-actions.html#edit-contact) or [create](https://www.zoho.com/ca/books/help/contacts/#create) a customer or vendor.
*   Navigate to the _Other Details_ section.
*   Select the **Tax Rule** you want to associate with the customer or vendor.
*   Click **Save**.

**Note:** Only exempt and manually created tax rules will be displayed in the **Tax Rule** dropdown.

### Associate Tax Rules with Items

To associate a tax rule with an item:

*   [Edit](https://www.zoho.com/ca/books/help/items/other-actions.html#edit-item) or [create](https://www.zoho.com/ca/books/help/items/#create-item) an item.
*   Navigate to the _Sales Information_ or _Purchase Information_ sections.
*   Click the _Sales Tax Rule_ dropdown, and select the appropriate rule for the item.
*   Similarly, click the _Purchase Tax Rule_ dropdown and select the appropriate rule for the item.

![Associate Tax Rules with Items](/ca/books/help/images/settings/taxes/associate-tax-rules-items.png)

*   Enter the other necessary details.
*   Click **Save**.

**Note:** Only exempt, zero-rate and manually created tax rules will be displayed in the _Sales Tax Rule_ and _Purchase Tax Rule_ dropdowns.

### Edit Tax Rules

To edit an existing tax rule:

*   Go to **Settings**.
*   Navigate to _Organization Settings_.
*   Select **Taxes** under _Taxes & Compliance_.
*   In the _Taxes_ pane, under _Advanced Tax Automation_, click **Tax Rules**.
*   Hover over the tax rule that you want to edit and click the **Edit** icon.
*   Make the necessary changes and click **Save**.

![Edit Tax Rules](/ca/books/help/images/settings/taxes/edit-tax-rule.png)

**Note:** Default tax rules cannot be edited.

### Delete Tax Rules

To delete a tax rule:

*   Go to **Settings**.
*   Navigate to _Organization Settings_.
*   Select **Taxes** under _Taxes & Compliance_.
*   In the _Taxes_ pane, under _Advanced Tax Automation_, click **Tax Rules**.
*   Hover over the tax rule that you want to delete and click the **Delete** icon.
*   Click **OK** in the confirmation pop-up.

**Note:** Default tax rules cannot be deleted.