When you buy and sell goods or services, there is often a tax imposed on the transaction. This tax can take the form of a Sales Tax (such as the in USA), or a Value Added tax (VAT or GST), as is prevalent in Australia, EU, New Zealand and many other countries. Parts of Canada are particularly well served in this respect in that they have both a GST and a sales tax (PST).
The good news is that MoneyWorks can manage these taxes for you1.
Note: If you are a home user or are not registered for GST or Sales Tax, you should have the I need to account for GST/VAT/Tax Preference option turned off. In this case this section will not be relevant to you.
There are fundamental differences between a Sales Tax and a Value Added Tax:
Sales Tax: This is imposed only at the end of the supply chain, and cannot (normally) be reclaimed. When you buy something that has sales tax in it, that tax is considered to be part of the purchase price. If you purchase an item to be used in your production, you will have a sales tax exemption for that item, so the supplier will not charge you sales tax. However if you charge sales tax on your sales, you are liable to pay the tax you have collected.
Value Added Tax: This is a percentage tax imposed at each stage of the supply chain. When you purchase an item, the tax will be included in the price; when you resell the item, you will add the tax to your price. You are liable to pay the tax you have collected, less the tax you have paid (i.e. just the tax on the value-add that you have provided).
If you are in the United States, or have just Sales tax refer to Sales Tax and PST.
If you have GST or VAT refer to GST and VAT.
If you are in Canada, you should read the section on GST. If you also have PST, you will also have to read the section on Sales Tax. QST (in Quebec) and HST (Harmonized Sales Tax), are essentially the same as GST (but at a higher rate); if you are in Alberta, you (currently) have just GST.
1 The US version of MoneyWorks can only handle Sales Tax. You need the international version to handle GST/VAT, or a mix of GST and Sales Tax. ↩