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How tax rounding works on invoices to keep totals consistent
How It Works
Item Level Rounding
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Taxes are calculated at the invoice line item level, and rounded to two decimal places.
Summing Line Items
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Once rounded, the system adds up all line item taxes to determine the total invoice tax.
FAQs
Q: Why not calculate taxes on the subtotal and then break it down by component?
Calculating tax from the subtotal can introduce rounding discrepancies, meaning the sum of individual line item taxes may not equal the total invoice tax - especially when multiple tax components apply.
Q: How does this compare to other accounting systems?
Platforms like Xero and QuickBooks Online also calculate and round tax at the line item level before summing totals for the invoice. Other systems may calculate tax on the invoice subtotal, which can result in small variances.
Q: Will the tax component breakdown always match the total invoice tax?
Yes. Because each line item is rounded first, the summed total will always match the overall invoice tax.