This article covers how taxes work and are calculated in Lightspeed Restaurant (K-Series), where to find reporting on the taxes you collect at the POS, and a country-specific overview of general tax information. Taxes include sales tax, value-added tax (VAT), goods and services tax (GST), or any other tax your business charges customers. 

How taxes work in Lightspeed

Review the bullets below to learn how taxes function in Lightspeed Restaurant (K-Series) before setting them up. Set up taxes in the Back Office to ensure the correct sales tax, VAT, or GST amount will be charged at the POS for every order.

• In Lightspeed Restaurant, tax rates and tax profiles control how much and when tax is charged. 

  Important: US and Canadian businesses must manually add tax rates and tax profiles to their Back Office. In other countries, tax rates and profiles are automatically set up when you create your Lightspeed account.

  Click to learn more about tax rates and profiles

  • Tax rates are individual tax percentages. For example, a 5% tax rate could represent the sales tax in your state or value-added tax (VAT) in your country.
  • Tax profiles contain the rules for when each tax rate or combination of rates will apply. For example, a tax profile could apply a tax rate to all orders or only to orders totaling over a certain amount.
• Tax profiles contain one or more tax rules, each of which applies a specific tax rate. 
  Click to learn more about tax rules

  • Each tax rule contains one or more conditions that determine when that tax rule will apply. 
  • Available tax conditions include: Order profile, Item unit price, Transaction line price, Tax profile item total, Receipt item total, Dates to apply this tax rule, and Accounting group item quantity.
• You assign tax profiles to accounting groups to determine which items each profile will apply to.
  Click to learn more about accounting groups

  • Each accounting group must be assigned a tax profile when it is created, but the tax profile can be changed at a later time if needed. Only one tax profile can be selected.
  • This will apply the tax rule(s) and tax rate(s) included in the profile to all items in the accounting group. 
  • For example, an accounting group called Alcohol could be assigned a tax profile that charges a specific tax rate on alcoholic drinks.
• Lightspeed Restaurant accounts are either tax exclusive or tax inclusive based on the country selected when setting up the account.
  Click to learn more about tax exclusive/inclusive

  • Tax exclusive means tax is not included in the price of items. Instead, it gets added on top of the price of taxable items at the POS. The United States and Canada are the only tax-exclusive countries in Lightspeed Restaurant.
  • Tax inclusive means tax is already included in the price of items. With tax-inclusive pricing, the tax amount is taken from the price of taxable items at the POS. All countries except the United States and Canada are tax inclusive in Lightspeed Restaurant.
  • See the next section for a step-by-step guide to how tax is calculated and rounded at the POS for both types of accounts. 
• Ready to start setting up taxes? Visit the Managing tax settings article for step-by-step help.

How tax is calculated at the POS

The Restaurant POS (K) app calculates taxes for orders based on how you set up tax rates, tax profiles, and accounting groups in the Back Office (see previous section). An order's actual tax amount will vary depending on whether your account is tax exclusive or tax inclusive and how taxes are rounded.

• For tax-exclusive accounts (United States and Canada), tax is added on top of the order total.
  Click for a detailed tax-exclusive example

  1. Item prices are totaled for each tax rate used on the order, resulting in the taxable amount for each rate.
     • For example, an order contains four items: two taxed at 5.5% (priced at $5 and $10) and two taxed at 10% (priced at $20 and $25).
     • $5 + $10 = $15 will be taxed at 5.5%
     • $20 + $25 = $45 will be taxed at 10%.
  2. Each taxable amount from step 1 is multiplied by the tax rate itself. The result is rounded to the nearest hundredth, giving the tax amount that will be charged for each rate.
     • $15 x 0.055 = $0.825, rounded to $0.83
     • $45 x .10 = $4.50, no rounding needed
  3. The tax amounts for each tax rate are added together, resulting in the total tax for the order.
     • $0.83 + $4.50 = $5.33 total tax on the order
• For tax-inclusive accounts (countries outside the United States and Canada), tax is pulled out of the order total. 
  Click for a detailed tax-inclusive example

  1. Item prices are totaled for each tax rate used on the order, resulting in the tax-inclusive total for each set of items.
     • For example, an order contains four items: two taxed at 5.5% (priced at $5 and $10) and two taxed at 10% (priced at $20 and $25).
     • $5 + $10 = $15 (includes 5.5% tax)
     • $20 + $25 = $45 (includes 10% tax)
  2. Each tax-inclusive total from step 1 is divided by one plus the tax rate. The result is rounded to the nearest hundredth, giving the pre-tax amount for each set of items.
     • $15 ÷ 1.055 = $14.218, rounded to $14.22
     • $45 ÷ 1.10 = $40.909, rounded to $40.91
  3. The pre-tax amounts from step 2 are added together, and the result is subtracted from the order total. This results in the total tax on the order.
     • $14.22 + $40.91 = $55.13 total pre-tax order amount
     • $15 + $45 - $55.13 = $4.87 total tax on the order

Where to find tax reporting

Tax reporting is available in two places: the Back Office and the Restaurant POS (K) app:

• In the Back Office, tax totals appear on many reports, allowing you to view tax information in different ways. For example, the Business Reports, Product mix Report, and Staff Report show the taxes collected in total, by item, and by employee respectively. Visit our About Reports article to learn more about Back Office reporting. 
• At the POS, the Fiscal report shows the total tax collected from the beginning of the first sales period on a given day until the end of that business day. Visit our Accessing and printing POS reports article to learn how to run POS reports, then see our Fiscal report article to learn more about the report itself.

Taxes by country

This section provides an overview of tax laws in different countries and links to government resources where you can find more detailed information.