# How do I support compound taxation such as tax-on-tax in countries like Canada?

## Overview

In Canada, specifically, Quebec and Prince Edward Island, the PST (Provincial Sales Tax) is calculated using the total amount which includes the GST (Goods and Services Tax). In other provinces, such as Manitoba, the PST is calculated on the total amount without tax. For example, an invoice line item of \$10 with 5% GST is calculated based on \$10.50 (105% of \$10) in Quebec and \$10 in Manitoba.

This article explains how Zuora can support multiple taxes on an invoice and apply different rates for each tax, including the Quebec PST example above.

## Solution

Zuora can support multiple taxes that are displayed independently on an invoice (for example, GST and PST).  It is possible to apply different rates for each tax.

In the Canada example, taxes are applied at a fixed rate so it is possible to define the following for Quebec:
GST=5%, PST=8.925% instead of 8.5%. This is because (100%+5%) * 8.5% = 8.925%. The total effective tax will be 13.925% as the PST includes the GST amount.

For Manitoba, where both the GST and PST are calculated off of the invoice item, the following can be defined:
GST=5%, PST=7%.  The total effective tax will be 12% as the PST and GST are both applied only to the total amount of the invoice item.