Setting the tax status of a customer

On most of your invoices and credit notes, you will have to apply some kind of tax. However, there are certain cases where this is not necessary:

• When your customer is exempt from paying tax, which usually occurs with religious, educational, or non-profit organizations.
• When your customer is a tax-registered business. In this case, the reverse charge mechanism might apply, and it is your customer who collects and pays the tax on their sales.

When some of your customers inform you that you should not charge them tax on their purchases for some of these reasons, you can manually change their tax status to override their default tax calculations.

In Quaderno, all of your customers will have one of the following tax statuses:

• Taxable : this is the default status which indicates that Quaderno will handle all tax calculations automatically, including standard exemptions and automatic reverse charge when tax ID validation services are available.
• Exempt : overrides the default tax calculations by manually specifying that your customer is exempt from paying taxes. Invoices won't charge tax on their purchases.
• Reverse charge : overrides the default tax calculations by manually specifying that your customer is a tax-registered business and that reverse charge must be applied to all their sales. Invoices won't charge tax on their purchases.

Note that for the last two statuses, Exempt and Reverse charge, some tax agencies might require a special document from your customer to prove their legal status. You will also be responsible for manually updating the contact's tax status in case your customer's legal status changes.