When entering invoices in Inn-Flow, sales tax should be allocated to the same Chart of Account as the expense it relates to – not coded to a separate "Sales Tax" account. This means you add the tax amount directly into the line item for each expense category on the invoice.
Why Tax Gets Split Across Expense Accounts
The recommended accounting practice in hotel operations is to include sales tax as part of each expense line item. This keeps your Operating Statement accurate by reflecting the true total cost of each category. Creating a standalone "Sales Tax" chart of account is not recommended because it separates the tax from the expense it belongs to, making departmental cost analysis less meaningful.
How to Code Sales Tax
Whether you're using the Invoice Extraction feature or entering invoices manually, follow this approach:
Review the invoice to identify the total sales tax and the expense line items.
If the vendor breaks out the tax per item, add each tax amount to its corresponding expense line in Inn-Flow.
If the vendor provides only a lump-sum tax amount, calculate the proportional tax for each expense category based on its share of the subtotal.
Enter the total for each line (expense + its portion of tax) under the correct Chart of Account.
Verify that all line items plus tax equal the invoice total, then Save.
Example: Splitting a Lump-Sum Tax
You receive an invoice for $868.49 total from a supplies vendor:
Guest Supplies: $500.00
Cleaning Supplies: $300.00
Subtotal: $800.00
Sales Tax: $68.49
Calculate each line's share of the tax:
Guest Supplies tax: $500 / $800 = 62.5% x $68.49 = $42.81
Cleaning Supplies tax: $300 / $800 = 37.5% x $68.49 = $25.68
In Inn-Flow, enter:
Chart of Account | Amount (incl. tax) |
Guest Supplies | $542.81 |
Cleaning Supplies | $325.68 |
Invoice Total | $868.49 |
IF PRO TIP: If the vendor's invoice itemizes the tax per product category, use those exact amounts rather than calculating proportionally. This avoids rounding differences.
Some clients create a separate Chart of Account for sales tax on invoices. While Inn-Flow allows this, it is not the recommended accounting practice. Keeping the tax with the expense gives you a more accurate picture of departmental costs on your Operating Statement.