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CGCPA
CGCPA, CPA
Category: Tax
Satisfied Customers: 3740
Experience:  over 40 years experience in tax matters
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Hi Charles, here is the scenario: I have booked a week for

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Hi Charles, here is the scenario: I have booked a week for 7000 euros for my customer. 7000 euros includes 10% european tax (VAT). I will collect 7000 EUR from my customer to my bus. account. I will keep 15%, which is my commission, and will forward the rest of the amount to the central agency that provides charter service. I believe I have to issue 2 receipts here. 1 to customer and 1 to the agency for my commission. Can you please help me to figure out how to show the numbers on the receipts ?
Submitted: 2 years ago.
Category: Tax
Expert:  CGCPA replied 2 years ago.

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.

If we use a hypothetical series of receipt numbers:

Receipt 2012-57: This one goes to the customer evidencing that they paid the fee.

Receipt 2012-57A: This one will go to the agency and will show

Received from Mr. John Doe Eu 7,000 for charter for the week of July 1- July 7, 2012

Less: Our commission Eu as our commission.

Payment to you Eu 6300

If you use the subset of receipt numbers consistently you will always know that the A series is for the payment to the agency and shows the commission.

Customer: replied 2 years ago.

1. Ok...so receipt 2012-57 that goes to the customer should show:

Charter services July 1-July 7,2012 eur 6300

Subtotal eur 6300

(VAT 10%) eur 700

TOTAL eur 7000

Hmmm..I am doing something wrong here since 10% (VAT) of 6300 is 630, not 700... (on the price list from the central agency only shows as total price 7000 euros including VAT of 10%)

2. Receipt 2012-57A that goes to the central agency should show:

Pymt received from Mr. Joh Doe for

charter period July1-July 7, 2012 7000 eur

Agent Commission - 1050 eur

Payment to the central agency TOTAL 5950 eur

Expert:  CGCPA replied 2 years ago.
You have the concept correct even if the math eludes you for the moment in this example.
Expert:  CGCPA replied 2 years ago.

Here is the correct math:

Total billing to customer 7,000

VAT (at 10%) 636.36

Charter fee 6.363.64

You back into this by dividing the total of 7,000 by 110 and multiplying the answer by either 10 (for the VAT) or by 100 (for the charter fee). The difference of .01 is due to rounding

For the agency, your receipt will be:

Charter fee 6363.64

commission at 15% 954.55

The VAT is then either your responsibility to pay or, depending on your contract with the agency, added to their payment (if they are paying the VAT). The VAT is not a portion of your commission.

Customer: replied 2 years ago.

Thank you so much for the formula Charles. You have just taught me how to fish :) That will really help me to figure out pricing myself from the price list in the future. Thank you.

Now, to completely understand the customer's receipt, can you please verify which categories should I include on the receipt:

1. Charter Fee

2. Discount ( Should I put Discount before or after the Subtotal on the receipt?)

3. Subtotal

4. VAT 10%

5. Sales Tax (if my customer is not a NY resident, NY sales tax would not apply, so should I keep that category on the receipt and I put zero in there or should I erase the Sales Tax category from that receipt? )

6. Total

Just for the record, I am not paying the VAT, the central agency that operates the boats does. That is why they have total weekly price shown as "7000 euros including VAT 10%"

On the Agency receipt, I would put:

1. Charter Fee received from the customer (7000 eur in this example)

2. Commission % ( - 954.55 eur in this example)

3. Subtotal (6045.45 eur)

4. In this case I assume I do not need to have VAT category since central agency is paying it and I am forwarding collected VAT to them, correct?

5. Sales Tax ( The same question as in customer's receipt. Should I keep this category on the receipt when NY sales tax does not apply and just put zero in the box or should I just erase this category in that case?)

5. Total

Additionally, Do I have to put EIN number from the company to the receipt?

Expert:  CGCPA replied 2 years ago.

You have items 1-6 of the customers receipt correct. I would leave item 5 in place and just enter zero or N/A if not a NY resident.

As to the agency receipt, I would expressly indicate that you are not taking commission on the VAT. Otherwise someone not as math savvy might think you are. I would not include the sales tax line for this document since that is not any part of their responsibility but is yours alone. There is also no requirement to place the EIN on receipts.

Customer: replied 2 years ago.

Great advice, will do. It is clear to me now. Thank you.

Finally, if I book a NY resident, I should charge NY Sales Tax.

Since NY Sales Tax of 8.875% consists of NY State Tax of 4%, NY City Tax of 4.5% and Metropolitan Commuter Transportation District surcharge of 0.375%, should I just put 8.875 % in the Sales Tax box on the receipt or do I have to break it down as shown above?

Expert:  CGCPA replied 2 years ago.

You are free to indicate the sales tax rate as one amount. However, there are different tax rates all over the state so you will need to ascertain exactly which county the resident is from.The most convenient way to do this is to print a copy of the sales tax return each quarter and use the rates shown therein. Here is a link to the form page. You should use the ST-100 form.

http://www.tax.ny.gov/forms/quarterly_filer_forms_st100_series.htm

When you look you will see the maze of rates in effect.

Customer: replied 2 years ago.

Excellent Charles, you are certainly the most competent and the most professional CPA I ever spoke to.

Thanks a million for your help !!! I really appreciate your time, patience, knowledge and effort. Thank you :)

Expert:  CGCPA replied 2 years ago.
You are always welcome. It is amazing at all the things you learn over a lifetime.
CGCPA, CPA
Category: Tax
Satisfied Customers: 3740
Experience: over 40 years experience in tax matters
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