Xeroom Taxes Tab - Mapping Taxes from WooCommerce to Xero

Modified on Tue, 30 Jan 2024 at 02:34 PM

Mapping WooCommerce Tax Classes to Xero Tax Methods

Under the Xeroom/Taxes tab is where the tax mappings are set.  If you do not see a taxes tab then enable taxes in Woocommerce and it will then show.  Set up your tax classes in WooCommerce and then you can map them to their equivalents in Xero.  Remember, that in WooCommerce taxes can be set as different classes to use at the product level such as Standard Rate, Reduced or Zero Rates and within each class can be different rates according to geography.     

How Xeroom Handles the Mapping

When Xeroom posts an order into Xero the order is not just copied as an image but is recreated as a proper invoice in Xero so that all the parts that go to make up that order are populated correctly and in the correct accounts including taxes.  It is therefore essential that the mappings are correct.  

Rounding Adjustments

If the taxes are not correct then Xeroom will match the totals and any difference arising from the wrong tax has to be processed by Xero and so will show up on the face of the invoice as a rounding adjustment.  

Simple and Complex Methods

There are two ways to do this, either simple or complex. Under Simple Tax Methods there is just one mapping for each of  Standard Rate, Reduced Rate, Zero Rate and any custom tax classes that you have set up ie you are not charging different rates within a tax class for different geographies.   

If you are then under Complex Tax Methods you are given the full details of each tax type  set up in WooCommerce for each rate so exact mappings can be made.  Tax methods in Xero are found under the advanced accounting menu option.  In xeroom a list of the available Tax Methods taken from your Xero account are given in the prepopulated drop down lists.  Make your selections and hit Submit to save.

Important: Make sure that you run tests to ensure that you have your GST/VAT tax mapping correctly set up by placing test orders for different countries and products.  Note that in WooCommerce taxes can be applied at a product level.

Xero Tax Methods

These are found under the advanced accounting menu.  By default there are a selection of rates that exist and are assigned to the correct accounts.  Note that tax rates have to match the account type eg a sales type tax has to be used on sales type accounts and not an expense type otherwise Xero will give an error like "TaxType code CAPEXINPUT2 cannot be used with account code 200."

Products Inclusive/Exclusive of GST/VAT

By default prices are received by Xero and treated as tax exclusive with whatever GST tax is specified in Xero or copied across then added by Xero. This meant that if you keep your prices as inclusive of GST in Woocommerce then it would be added again on posting into Xero so it was added twice.  Xeroom will pick up whatever the tax setting is in Woocommerce and handle the GST accordingly.  Note that there is a setting in invoices in Xero to hard set this if you find that they are not showing correctly but this will only affect how tax is displayed in the invoice not how it is handled when posted from WooCommerce.

It can get very confusing so here is an example to help you decide which setting to use in WooCommerce and how to store your prices there in order to get the correct result in Xero.  The second line depicts the error condition since the price in Xero is showing as 144 instead of 120. The solution is to move to the first or third line settings.

Sales Tax Wrongly Showing as a Rounding Adjustment on Xero Invoice

Normally tax on export sales are zero rated.  If you find that tax is being added as in the example below where the company is UK based and the order for the US then no VAT is due.  In order to balance the invoice total in Xero with the order total in WooCommerce Xeroom has made an adjustment which is dumped into the Rounding Adjustment account in Xero.  This is clearly incorrect.  It is due to no tax method being set up for the Rest Of World (ROW) in WooCommerce settings.  This should be set up as below using the wildcard "*" character.  WooCommerce works down the list of taxes until the country is matched so if there is no match it will take the rate of the bottom of the list.  So here it was wrongly picking up GB and so the 20% (VAT on Income) rate is applied.  

Once the * catchall is added then it will appear in the list to map in the Xeroom complex settings.  Map to a suitable zero rate method or if one doesn't show then add one in Xero.  After this the tax will then map correctly and the false rounding adjustment disappear.

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