How do I support compound taxes?

In relatively rare cases, taxes are applied on a compound basis. For example, in some Canadian provinces, GST (Goods and Services Tax) is charged on the selling price, and PST (Provincial Sales Tax) is charged on the total of the selling price plus GST.

To support this case, each tax in the tax settings page has an "applies to" option. In most cases, the "applies to" field should be set to "Item amount".

In the compound tax example above, however, you would specify that PST is a compound tax by setting the "Applies to" field to "Item amount + tax 1". When creating your invoice, you would then specify GST as Tax 1 and PST as Tax 2.

See this documentation on the tax settings page for details.