Tax inclusive or exclusive
The single most common invoicing mistake is entering a price that already includes tax into a field that expects a price without it, and then adding tax again. The document looks plausible and the total is wrong by exactly the tax rate. The app asks you which kind of price you are typing before it calculates anything, and this article is about answering that question correctly.
Two ways to say the same amount
Exclusive means the price you type is the net amount and tax is added on top: 100 at 20 per cent becomes 120. Inclusive means the price you type is what the customer pays in total and the tax is already inside it: 120 at 20 per cent is 100 net plus 20 tax. Which convention you use is usually decided by your market rather than by you — business-to-business pricing is typically quoted excluding tax, consumer prices are typically quoted including it, because a shopper wants to know what they will actually be charged.
Backing tax out of a gross price
Taking tax off a gross amount is not subtracting the percentage — that is the mistake behind an enormous number of wrong invoices. With tax included, the net is the gross divided by one plus the rate: at 20 per cent, 120 divided by 1.20 gives 100, and the tax is 20. Subtracting 20 per cent from 120 gives 96, which is wrong by four. The app applies the division for you when you choose inclusive pricing, and rounds the result to whole cents once, on each line.
Different rates on different lines
One invoice can carry more than one rate: goods at the standard rate and a service or a printed item at a reduced rate, or a mix of taxable and exempt lines. Turn on per-line rates and each row carries its own, so the totals block breaks down by rate rather than presenting a single tax figure that cannot be verified. If you charge no tax at all — because you are below a threshold, or the transaction is exempt, or the tax is the buyer's responsibility — set the mode to none and say why on the document, since a zero without an explanation is the kind of thing that gets queried.
What the app decides, and what it does not
The arithmetic is ours: inclusive and exclusive conversion, per-line rates, the discount spread across lines before tax, cent-exact rounding. Which rate applies to what you sell is not, and no invoicing tool can tell you. Rates, thresholds, exemptions and the wording you must use when tax is not charged are national matters that also change over time. Get the rate from your tax authority or your accountant once, then the document will apply it consistently.
Frequently asked questions
How do I remove VAT from a total?
Divide by one plus the rate: at 20 per cent, divide by 1.20. Subtracting 20 per cent gives a different — and wrong — answer.
Should I quote prices with or without tax?
Business customers usually expect prices excluding tax; consumers usually expect the price they will pay. Follow your market's convention and label the document clearly.
Can one invoice have two different tax rates?
Yes. Turn on per-line rates and the totals block will break down by rate.
What if I do not charge tax at all?
Set the tax mode to none and state the reason on the document. The required wording is country-specific, so check what yours expects.
Which rate applies to what I sell?
That comes from your tax authority, not from us. It varies by country, by product category, and over time.
Why is the tax line one cent off what I calculated?
Almost certainly rounding, and probably per-line versus per-total rounding. That has its own article in this guide.
Invoices where the totals actually add up. Invoice Maker builds invoices, proformas, quotes and receipts in your browser, does the money in whole cents so the VAT line never drifts, and exports a PDF. Nothing is uploaded.
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