Taxes & Fees - Everything you need to know

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This article will walk you through the process of creating taxes and fees on your myfrontdesk account. It also explains the difference between exclusive/inclusive taxes and how to link your taxes and fees to items/sources.

1. Taxes and Fees Overview

Enter all the taxes and fees you charge on this page. This should include any sales, state or federal taxes, or any other taxes you may charge on top of a room night or a sold product.

Login to your myfrontdesk account:

1 - Click on the manage gear icon to go to the settings menu
2 - Under Property Configuration section, click on 'Taxes and Fees' tab
3 - +New Tax or Fee

2. Creating New Taxes and Fees

1. Select whether you are adding a tax or a fee

2. Set whether the tax/fee is for items or reservations. You can check both boxes if it applies to more than one.

3. Name the tax/fee. This is public facing and seen by guests on their reservation summary, invoice, and folio.

  • The text entered appears on mybookings. If you would like the text translated to the language in which the guest is viewing the bookings page, enter the translation of this text for each language. Leaving it empty for that language will show the same text as your main application language.

4. Code: Optional and for internal use. These are often issued by state or federal governments.

5. How is your tax/fee calculated? Exclusive or Inclusive

6. Select the Type of your Tax/Fee               

7. Amount: Up to 4 decimal places are currently supported. (Example: 15.5051%)

8. If it's a Tax, the system displays an extra option which allows you to configure if this tax should be charged on top of any fees.

  • If you select "YES" a CHARGED ON box will appear to the right. Use this to select which fees this tax will be added to.
  • If you select "NO" that is all you need to do.

Click on Save button when you are finished!

NOTE: By creating a tax you are not automatically applying it to your rates, so this needs to be done separately. You should link your taxes and fees to your reservation sources.

Please see the following article to learn more:

* Applying Taxes and Fees To Reservation Sources

To link your taxes/fees to an item/product, see the section below "Linking Taxes and Fees to an Item."

3. Taxes and Fees Types

There are few ways to set up and calculate your taxes and fees:

3.1 Exclusive/Inclusive Tax

Exclusive Tax

When the tax/fee is not included in the rate

If you enter a rate of $100 and set up a tax of 10%. The guest will pay $110. This is because the tax/fee is not included in the rates you have entered. Your 10% tax has been added to the rate.

Configuration:

  • Room Rate set: $100
  • Tax: 10%

Result:

  • Room Rate: $100
  • Tax: $10
  • Total: $110

Inclusive Tax

When the tax/fee is included in the rate

If you enter a rate of $100 and set up a tax of 10%. The guest will pay $100 because the tax/fee is included in the rate. They will see on their booking summary that 10% of the $100 they paid was the tax.

Configuration:

  • Room Rate set: $100
  • Tax: 10%

Result:

  • Room Rate: $90.91
  • Tax: $9.09
  • Total: $100

Here is another example of the difference between exclusive/inclusive taxes and how it appears on guest's folio.

 Wait, shouldn't the tax collected be $10 instead of $9.09? $10 is 10% of $100

The answer is No.
By setting the tax as inclusive, the system takes your total room rate of $100 and then calculates what the rate would need to be to reach the total of $100 when a 10% tax is applied. In this example, the inclusive tax is calculated as 10% of the actual room rate (10% of 90.91, which adds up to 100) Okay. Can I see the formula? Sure, here:

  • Tax excluded price  = total item price / ((tax rate /100) + 1 )

Example:

  • 100 / ((10/100) +1 ) = 90.91 

I still don't get it!
For a detailed article about calculating inclusive and exclusive tax, you can read this one from an accounting website.

3.2 Per Person / Per Night

Per Person/Per Night option means that the number of adults and/or children is multiplied against the number of room nights.

If this type is selected, you can choose whether this tax/fee should be applied to adults, children, or all guests.  

For each check box selected, the system will display a field to enter the tax/fee value, so the amount for children can be different from adults.

Please Note:

- Currently it will only be offered as an exclusive tax/fee
- Only a fixed amount will be allowed
- The “per person per night” tax/fee can only be calculated for reservations at this time

Setting Max Length Rule

You also have the ability to set a max length. If yes is selected, you can add a max length of nights - it means that the tax will only be calculated for a specified number of days.
After this, the tax would stop applying.

3.3 Percentage of Total Amount

The system will calculate the percentage of the tax/fee based on the total amount of each daily rate.

Please consider that:

  • This type can can be Inclusive or Exclusive.
  • If it's a tax, the system allows you to charge this tax on top of any existing fee.

Here is an example of a 10% exclusive fee of total amount

3.4 Fixed Per Room Night/Item

The system will apply a fixed amount of the tax/fee under each room night/item. It can also be an inclusive or exclusive tax/fee.

3.5 Fixed Per Accommodation

This type of fee/tax can be only an exclusive tax and the system will apply a fixed amount based on the number of accommodations existing in the reservation.
If you have 2 accommodations under the same reservation, the system will apply the tax twice on the guest's folio, regardless of the room nights quantity.

Here is an example: This reservation has 2 accommodations.

3.6 Fixed Per Reservation

This type of fee/tax can only be exclusive and the system will apply a fixed amount to each reservation.

If you have 2 accommodations under the same reservation, the system will apply the tax once on the guest's folio, regardless of the room nights quantity or number of accommodations.

4. Including taxes and fees in the guest deposit

By default, when you set up a deposit in myfrontdesk the taxes and fees you have set up will not automatically be included. When a property sets their deposit to 100%, the deposit is collected only for the room rate, and does not account for any taxes or fees. If you would like the amount of the taxes and/or fees you have set up to be included as part of the deposit amount, follow the steps below.

1 - Click on the"manage" gear icon to go to the settings menu
2 - Click on 'Policies' tab under Property Configuration section
3 - By choosing Percentage or First Day Price options, the system will display an option for you to Include taxes and fees specified as part of the deposit

5. Adding exclusive tax/fee to a reservation manually

Adding an exclusive tax/fee directly to reservation means that you need to calculate the amount of the tax/fee manually. To learn how to do it, please, refer to this article from our Knowledge Base: Adding exclusive tax/fee to a reservation

To learn how to set up the system to add and calculate the taxes/fees automatically for specific sources, please check this article: Applying Taxes and Fees to Specific Sources

6. Linking Taxes & Fees to an Existing Item
  1. Click the gear Icon
  2. Go to Items & Services under Property Configuration 
  3. Select 'Items and Services' 
  4. Find the item you want to add tax to and click on the edit icon

If the Tax or Fee already exists, click the arrow next to 'Apply Tax or Fee.'
Find your desired Fee/Tax and click the check box next to the desired Fee/Tax.

Click Save Item

7. Editing/Deleting Taxes & Fees

- Click on the pencil icon to edit an existing tax/fee
- Click on the X to delete it

Deleting a tax or fee will only apply to new future reservations. It will not apply to all the transactions and reservations that already exist within the system.

If you are updating existing taxes/fees after you have gone live the following warning might appear:
Select the option that you want to apply to your property and click on continue.

8. Frequently Asked Questions
How will my taxes and fees be displayed on a guest's invoice?

Once you download the invoice it's possible to see the taxes and fees separated.

What is the difference between Taxes and Fees?

Taxes are a financial charge or other levy imposed upon a taxpayer, contribution to state revenue.
Example:  VAT(USA), IVA(Europe), ISS(Brazil)

A Fee is charge in exchange for services.
Example: Cleaning Fee, Booking Fee

Have more questions? Contact Support

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