Example
Subtotal $1,700, sales tax at 8.25% $140.25, total $1,840.25.
Also called a VAT invoice or a GST invoice depending on the country.
What it means in practice
Where a client is registered for VAT, GST or sales tax, they need a tax invoice to reclaim the tax. That means the tax as its own line, the rate applied, and your registration number on the document.
If you are not registered, you do not add a tax line at all. Charging tax you are not registered to collect is a problem, not a rounding.
Covered in full in the guide to make an invoice.
Where it shows up on the paperwork
Everything a normal invoice carries, plus the tax as its own line, the rate applied, and your tax registration number. Registered clients need all three to reclaim.
What goes wrong
- Charging tax you are not registered to collect.
- Showing a tax-inclusive total with no rate, so a registered client cannot reclaim.
- Leaving your registration number off, which makes the invoice useless to their accounts team.
Common questions
What makes an invoice a tax invoice?
The tax shown separately with its rate, and your registration number on the document. Without those, a registered client cannot use it to reclaim.
Do I need to charge sales tax on my invoices?
It depends on where you are, what you sell and whether you are registered. If you are registered, show it as a line. If not, there is no tax line at all.