When you work in the service industry it is common to have to spend money in order to deliver the service to your client. In many cases you may be able to charge these expenses back to your client. This practice goes by many names, including Reimbursements, Recharges, Billable Expenses, Disbursements etc. The issue comes when you are spending money that you then need to be reimbursed for by a client. This is complicated when there are multiple sales taxes involved and expense deduction limitations (such as on meals and entertainment). The question is who claims the sales tax back and…
Use Taxes are often reverse Sales Tax that businesses self-assess. This is common in US States and Canadian Provinces with PST (BC, SK & MB) which require businesses to self-assess Use Tax on out-of-state/province purchases. Xero goes a great job of managing Sales Tax we charge on our invoices, and even on Input Tax Credits for countries with a GST/VAT style tax. However, managing Use Taxes are a little more tricky.
Xero will not calculate the Use Tax for you, but it can help you accumulate the raw data. The trick is to be able to flag the eligible transactions. The trick here is to create a Tax Code with a 0% rate, and then to apply this all eligible transactions. If you have more than one form of Use Tax then you should set up more than one code.