Tax Included & How to Back Out Sales Tax

This article provides a workaround for including tax in the prices of inventory items. To get started, update sales prices for your items to add the relevant tax amount, and organize items into departments that represent each tax rate. Because ShopKeep does not officially support tax-inclusive pricing or VAT, you will need to manually calculate the estimated amount of tax collected at the register.

IMPORTANT: Before continuing, be aware that by using this workaround:

  • Taxes will not appear on customer receipts or in ShopKeep reporting.
  • Taxes collected at the register will need to be manually backed out of your net sales. This tax amount will be an estimate and may not match the actual amount of tax collected due to differences introduced by rounding.
  • Tax laws can change at any time, and we recommend contacting a tax professional for specific advice regarding your business.
  • Table of Contents

    Add Tax to Item Pricing

    To implement the tax included workaround, manually add tax to all item prices and separate items into departments that represent each tax rate. After this initial setup, you’ll be able to manually back out the estimated amount of tax collected from reporting.

    1. Update the sales price and taxable status of items using Bulk Management or the Item List.
      a Change each item’s price to include tax.
      Example: The adjusted price of a $10 item with 7.75% tax ($0.78) should be $10.78.
      b Make these items non-taxable.
    2. Move each group of items taxed at a different rate into a separate department.

      Example: Put alcoholic drinks taxed at 9.75% into an ‘Alcohol’ department and food items taxed at 7.75% into a ‘Food’ department.

    3. Move all untaxed items into another separate department.
    4. Update the 'Extra Text' field on receipts to tell customers that tax is included in pricing.
    5. After running transactions, follow the steps below to manually back out the estimated tax from each department's total sales.

    Back Out Tax Amount

    Follow the steps below to manually back the estimated sales tax amount out of the total sales for each department after you have added tax to item pricing.

    IMPORTANT: The tax amount you back out of your net sales will be an estimate and may not match the actual amount of tax collected due to differences introduced by rounding.

    1. Run the Sales by Department report.
    2. To get the pre-tax sales amount, divide each department's net sales by 1 plus that department's tax rate.
      Example:
      • Tax rate for the ‘Food’ department: 7.75% or .0775
      • Total ‘Food’ net sales (includes sales tax): $18,295
      • Total pre-tax sales amount = $18,295 / 1.0775 = $16,979.12
    3. To get the sales tax amount, subtract the pre-tax sales amount from the department's net sales.

      Example: Total ‘Food’ sales tax = $18,295 – $16,979.12 = $1,315.88

    4. Add together the values from step 3 for each department to get the total estimated tax amount.