Ok so now you have bought Traverse Windows Accounting Software and you have to set up the tax parameters. It's easy, lets do it step by step. We will assume your company is in BC and sells hard or soft goods.

You probably only have to set up one class, you might call it "TAXABLE". It will become TAX CLASS "0". What is wanted here is a class for each inventory item you sell where the tax treatment (if applicable) is different from another inventory item. Hard and soft goods in Canada are currently taxed at least 7% for GST. You would only have to create other classes if you sell or purchase an item where the tax rate is different simply by the nature of the item itself with no regard to a seller or purchaser's tax status IE: Food is not usually taxable, nor are Prescription Eye Glasses. Medical Supplies may be exempt or rated differently depending on the item. Some safety items may be exempt provincial taxes but not federal taxes. Normally you would not have to create an EXEMPT class nor would you need a separate class unless the tax rate is different just because of the nature of the item itself.

Add a Tax Location Id called "GST", Tax Level 1, Tax Authority "CA". Name it "Goods and Service Tax" with a Tax Id of "GST". Check "Tax on Freight" and "Tax on Misc." Enter your GST Tax "Tax Liability Acct" and "Tax Refundable Acct" from your General Ledger accounts. (They can be the same if it's OK for your Invoice and Credit Note GST taxes to accumulate in the same GL Account). Enter a G/L Code in the "Default Expense Account" meaning the G/L code for your INPUT TAX CREDITS (ITC's) that you use to offset the amounts accumulating in the "TAX LIABILITY G/L ACCOUNT". Now if you have created more than one TAX CLASS you may want to select the ß> box to the right of the "Tax Paid" heading and enter a different "Expense Account" for each TAX CLASS if you need to accumulate ITC's into separate G/L Codes for each class. Enter 7.00 for in the white box below both Sales Tax and Purch Tax.

Add a new Tax Group. "TAX GROUP ID" should be "GST ONLY" with the name "GST Taxable Only" and select "OK" to create the new TAX GROUP.

Add a new Tax Location Id called "PST/BC", Tax Level 2, Tax Authority "BC". Name it "BC Sales Tax" with a Tax Id of "PST/BC". Do not check "Tax on Freight" and "Tax on Misc." Enter your BC Tax "Tax Liability Acct" and "Tax Refundable Acct" from your General Ledger accounts. (They can be the same if it's OK for your Invoice and Credit Note PST taxes to accumulate in the same GL Account). Enter a G/L Code in the "Default Expense Account" meaning the G/L code for your BC Sales tax collections. Now if you have created more than one TAX CLASS you may want to select the ß> box to the right of the "Tax Paid" heading and enter a different "Expense Account" for each TAX CLASS if you need to accumulate BC Sales tax into separate G/L Codes for each class. Enter 7.00 for in the white box below Sales Tax and Purch Tax.

Now if you are like most BC companies you bury any PST you pay to the item you have purchased. If so, check "Use Expense Account from Line Items when Purchasing". This will cause the system to add the 7% PST you might have had to pay to the G/L Account you used for the item you have purchased.

Add a new Tax Group. "TAX GROUP ID" should be "GST & PST" with the name "GST & PST/BC Taxes Payable" and select "OK" to create the new TAX GROUP.

• For "GST ONLY", set the "One" column to "GST' and do not set the "Two" column. Set the "Reporting Method to "Separate" (This will cause the GST to display on the invoice).
• For "GST & PST", set the "One" column to "GST' and set the "Two" column to "PST/BC". Again set the "Reporting Method to "Separate" (Causes GST and PST to display on the invoice).

Now you are ready to set the TAX GROUPS for your Customers to either "GST ONLY" or "GST & PST" depending on their tax status with your company. If the Customer is tax exempt, simply unset the "Taxable" check box. You do not need an "EXEMPT" TAX GROUP.

Now you are ready to set the TAX GROUPS for your Suppliers to either "GST ONLY" or "GST & PST" depending on your tax status with your supplier. If you are tax exempt, simply unset the "Taxable" check box. You do not need an "EXEMPT" TAX GROUP.

• Now if you sell to a customer who's TAX GROUP has been set to "GST ONLY", Traverse will charge 7% to all items. If the client has to pay GST and PST, the TAX GROUP will be set to "GST & PST" and Traverse will charge 7% GST and 7% PST to each line item set to TAX CLASS "0".
• If the client is, say a US Customer, and is not subject to any tax and if you unchecked the "Taxable" box, no taxes will be calculated regardless of the "TAX GROUP" he is defaulted to.
• Now if you purchase from a supplier who's TAX GROUP has been set to "GST ONLY", Traverse will charge 7% to all items. If you have to pay GST and PST, the TAX GROUP will be set to "GST & PST" and Traverse will charge 7% GST and 7% PST to each line item set to TAX CLASS "0".
• PST will be absorbed into the cost GL Account of the item purchased if you have checked the "Use Expense Account from Line Items when Purchasing" check box.
• If you have set more than one TAX CLASS any items set to TAX CLASSES other than "0" will be handed appropriately.
• Non-stock items will default to TAX CLASS "0" when you sell or purchase them. You must change the TAX CLASS if appropriate on a line item basis.