Documentation Index

Fetch the complete documentation index at: https://docs.dualentry.com/llms.txt

Use this file to discover all available pages before exploring further.

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US Taxes

DualEntry includes a native US sales and use tax engine that covers all 50 states and roughly 13,000 local jurisdictions. The underlying rate table is maintained by DualEntry and pushed into your tenant each month for every state where you have a nexus, so the rates on your transactions stay current without any manual updates.

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How US tax works in DualEntry

Three records drive every US tax calculation:

• Nexus - a state where your company is registered to collect and remit tax. Configure under Configuration → Tax Setup → Nexuses.
• Tax Code - a jurisdiction-level record (state, county, city, zip code) with the combined tax rate for that location. DualEntry maintains these for you based on the nexuses you’ve set up.
• Product Tax Code - a flag on each item that tells the system whether the product is taxable or non-taxable.

On each transaction, DualEntry combines the customer’s address with the relevant nexus and product tax codes to determine the correct rate, and posts the result directly to the General Ledger. No separate journal entry is created. The tax lines live on the source document (invoice, bill, etc.).

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Setting up nexuses

A nexus represents a state where you’re registered to collect and remit sales tax. Without a nexus, DualEntry won’t apply tax. This prevents accidental over-collection. To create a nexus, go to Configuration → Tax Setup → Nexuses and add an entry for each state you’re registered in. Each nexus carries:

• Company - which legal entity the nexus belongs to (one company can have many nexuses)
• State - the US state
• Tax agency - the vendor record that represents the state’s department of revenue, used for remittance
  • Ensure the vendor record is set to type Tax Agency
• Tax liability account - the GL account where collected sales tax accrues, typically an Other Current Liability account
• Tax asset account - leave empty (does not apply to US sales tax)
• Effective date - when this nexus registration begins
• Memo - optional notes for context

Once a nexus is saved, DualEntry pushes the current tax codes for that state into your tenant and starts applying tax automatically on transactions tied to that state. Product tax codes define what: whether an item is taxable. DualEntry ships with two default system product tax codes (TAXABLE and NON_TAXABLE) that you can assign to an Item. For most US sales tax scenarios, these two codes are all you need. If you require finer-grained classification, you can add additional product tax codes under Configuration → Tax Setup → Product Tax Codes; additional codes are typically only needed when integrating with a third-party tax engine like Avalara, which uses its own taxability codes.

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Customer tax exemptions

Some customers are exempt from sales tax (typically resellers, government agencies, and qualifying non-profits). DualEntry handles this on the customer record:

• Taxable - a toggle that controls whether tax is calculated for this customer. Set to false to mark the customer as tax-exempt.
• Tax registration number - a free-text field for storing the exemption certificate number, sales tax permit, or other identifier. This is for audit reference; DualEntry doesn’t validate the certificate against an external authority.
• Default tax code - the tax code that pre-fills on transactions for this customer. You can override it per line if needed.

When you create a transaction for an exempt customer, DualEntry skips the tax calculation entirely and the exemption is auditable later from the customer record.

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How tax applies to transactions

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Sales tax on money-in

When you create an invoice, cash sale, or customer credit for a taxable customer, DualEntry calculates tax on each taxable line using the customer’s shipping address and the appropriate tax code. For example: a customer in Corona, California (zip 92881) buys a widget for $1,000. The combined tax rate for that zip code is 9.25$92.50 of sales tax. The GL impact on the cash sale is:

• Debit Bank: $1,092.50
• Credit Income: $1,000.00
• Credit Sales tax payable: $92.50

The same logic applies on invoices (debiting Accounts Receivable instead of Bank, since the customer hasn’t paid yet) and on customer credits (reversing the original entries).

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Use tax on money-out

Use tax is self-assessed on purchases where the vendor didn’t charge sales tax, common for out-of-state purchases or vendors who don’t track your nexus. When you record a bill or direct expense with a use-tax-eligible line, apply the appropriate tax code and DualEntry accrues the use tax liability. For example: a $500 office supplies bill from an out-of-state vendor who didn’t charge tax, where your use tax rate is 9%. The GL impact is:

• Debit Office supplies expense: $545.00
• Credit Accounts payable: $500.00
• Credit Sales tax payable: $45.00

Use tax flows into the same liability account as sales tax, so it joins the period’s total remittance to the agency.

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Period-end and remitting tax

At period end, you’ll need to file your sales tax returns and remit payment to each state agency. The current workflow:

1. Review your liability. Open the General Ledger and filter the sales tax liability accounts by company and period. The balance shows what’s accrued for each nexus.
2. File your return externally. Each state has its own filing portal and form. DualEntry does not file returns directly. Prepare and submit the return through the state’s system.
3. Record the payment. Once you’ve paid the tax agency, post a vendor bill (or direct payment) to the tax agency vendor for the amount remitted. The GL impact is a debit to sales tax payable and a credit to bank, closing out the period’s collected tax.

After the payment posts, the liability account balance for that period should zero out, with any portion not yet due carrying forward.

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Where to go next

If you operate internationally, see Non-US Taxes for VAT and GST. For an overview of how tax management fits together across regions, see the Tax Management index. For how tax postings flow into the books, see General Ledger.