Sales Tax in Design Manager is designed as a set-it-and-forget-it configuration. However, because Sales Tax touches many areas of the platform, it's important to understand those different areas, whether you're updating a Sales Tax percentage/code, configuring complex jurisdictions, running Sales Tax reports, or correcting Sales Tax entries.
Disclaimer: Design Manager and its support team are not Sales Tax professionals. Always confer with your Accounting/tax professional to confirm which states you're required to collect and remit in, what's taxable in your jurisdiction, and how local surtaxes should be applied. This article covers how to configure Design Manager to reflect those decisions, not what the decisions should be.
Design Manager only supports U.S. Sales Tax. DM's Sales Tax Code glossary, tax calculation engine, and reporting are built around U.S. state, county, and local tax structures (state abbreviations, state/local taxing authorities, Component-based taxability).
The Foundation: Sales Tax Codes
Every taxable calculation in Design Manager starts with a Sales Tax Code, found under Accounting in the navigation bar.
A Sales Tax Code includes:
A short code (up to 5 characters) and a name
The state abbreviation: Design Manager groups all Sales Tax codes first by state abbreviation, so you can easily see total liability owed to a given state even if you have multiple codes within it (e.g., separate codes or percentages for different counties)
The tax percentage calculation: Design Manager allows multiple percentage calculations, or rules. Each rule has an authority name/description and a percentage. For a simple, single-rate jurisdiction, you'll only need one rule (e.g., "Commonwealth of PA" at 6%). For jurisdictions with a state rate plus a local surtax (a county or city), add a separate rule for each authority rather than combining them into one blended rate
Taxable defaults for each Component type: Design Manager allows different percentages under a Component and lets you mark that Component as taxable or not (e.g., in the State of Maryland, Time is not taxed and can show a 0% rate while also being marked non-taxable)
The Sales Tax GL account the activity should post to: Design Manager comes preconfigured with one GL account, Sales Tax Collected, 21000. You can add additional GL accounts for Sales Tax if needed
The name of the Sales Tax you want printed on documents in Design Manager, such as Proposals and Client Invoices
Why keep rules separate instead of entering one combined percentage?
The state-level rate stays consistent across every code for that state, since it's set once as its own rule
The Sales Tax report and Invoice can break tax out by authority (state vs. county), so you can see, and remit, the right amount to each
More complex rules (see Advanced Scenarios below) are easier to build and adjust when they're separated
You can also override the auto-populated percentage on a per-Component basis within a rule, for example, if Design Fee should be taxed at a different rate than Merchandise in your state.
Taxable Defaults and How They Apply Elsewhere in Design Manager
You (with your Accounting professional) must determine which goods and services are taxable in your jurisdiction. Besides Merchandise and Time, Design Manager's other Component types are fully user-definable, which is useful precisely because taxability varies so much by area (for example, some states tax freight and design fees differently, or treat "freight" and "shipping" as separate Component types).
Design Manager comes preconfigured with these Component types: Merchandise, Freight, Design Fee, Install/Labor, Crating, and Time.
Where taxable defaults apply
Sales Tax Code: Taxable defaults are set per Component type on the code itself. Uncheck any Component type you should not collect tax on
Project: These defaults flow down to the Project's Info tab and Settings tab → Advanced/Mark-Up, where you can see (and override) taxable settings for that specific Project
Component: From there, the setting flows down again to the actual Component/Item window when Items are created
Proposals and Invoices: Depending on your Project settings, Sales Tax will be calculated on Proposals and Invoices
General Ledger: Sales Tax is recorded to the GL account when a client Invoice with Sales Tax is posted
A few important notes:
Certain reports and documents in DM treat a Component as taxable based on the taxable setting, not the tax percentage. This means a Component could have a 0% rate but still show as "taxable" on reports simply because the taxable checkbox is checked, so it's important to get these settings right from the start
Changing the Sales Tax Code on a Project does not automatically update that Project's taxable settings. If those settings need to be corrected retroactively, you'll need to update the Project(s) directly.
Updating Sales Tax Codes When Rates Change
Tax rates change periodically, and in Design Manager you have two options when updating Sales Tax Codes.
Option 1: Create a new code, don't edit the old one
Create a brand-new Sales Tax Code for the new rate. This approach:
Makes it easy to void and re-bill prior-period Invoices if needed
Keeps old-rate and new-rate billing separated on the Sales Tax report
Lets you simply mark the old code inactive once it's no longer needed
If an Invoice was already produced using the old rate by mistake, it needs to be credited (reversed) and re-billed on the same date, in the same prior period, with the new Sales Tax code.
Applying the new code to open Projects
Once the new code exists, assign it to each open Project that will bill at the new rate:
Find and open the Project
Go to the Info tab
In the Sales Tax Code field (bottom right), select the new Sales Tax code from the dropdown
Click Save
Go to the Settings tab and select Advanced/Mark-Up
Double-check that the taxable defaults shown are correct
Repeat for every affected Project
When creating the next Proposal or Invoice with the new Sales Tax code, double-check the calculated Sales Tax percentage.
Retiring old codes
Only mark a code Inactive once you're confident it won't be needed again, since Design Manager recommends keeping the old code active for a few months in case a prior Invoice needs to be voided and re-billed.
To bring an inactive code back: open the Sales Tax Code list, toggle Show Inactive, edit the code, and remove the inactive checkmark.
Option 2: Edit the existing code
Edit an existing Sales Tax Code with the new rate. This approach:
Makes it easy to update existing Projects with the new Sales Tax rate
Keeps your Sales Tax code list organized without having duplicate rates as described in Option 1.
Editing the existing Sales Tax code:
Go to Accounting in the navigation bar on the left and select Sales Tax Codes. Find the Sales Tax code you want to change and click on the code.
Change the name to reflect this code has been updated. For example, State of MD Tax changed to NEW State of MD Tax.
Click on the Authority Name under Tax Calculations and change the percentage, then Save.
Check that the taxable defaults shown are correct
Click Save
When creating the next Proposal or Invoice with the edited Sales Tax code, double-check the calculated Sales Tax percentage. If there are existing Proposals created that need to be updated with the edited Sales Tax code, then edit the Proposal to reflect the edit.
It is recommended to contact your Accounting/tax professional to determine which option you should choose when Sales Tax rates change.
Advanced Scenarios: Multiple Jurisdictions and Complex Rules
Design Manager's rule-based structure can handle tax situations well beyond a single flat state rate. A few real examples illustrate how flexible this can get.
Example 1: State + county surtax (Philadelphia County)
Pennsylvania charges 6% statewide, but Philadelphia County adds an additional 2% on top. Rather than creating one code with a blended 8% rate:
Create a Sales Tax code for Philadelphia (e.g., name "PA State/PA County," state abbreviation PA)
Add two rules to that code: one for "Commonwealth of PA" at 6%, and a second for "County of Philadelphia" at 2%
On a $200 Item, this produces $12 (state) + $4 (county) = $16 in tax, and because the rules are separate, both the Invoice and the Sales Tax report can show the state and county portions independently.
Example 2: Threshold- and unit-based surtaxes (Nassau County, FL)
Some local surtaxes are more complex still: for example, a county that only taxes up to a certain dollar threshold, and/or taxes each unit of merchandise separately rather than a whole set. Florida's Nassau County is an example: the state charges 6% on the full price, while the county charges an additional 1%, but only on the first $5,000 of each unit's price.
To model this in Design Manager:
Create a state-level rule (Florida Department of Revenue, 6%, applied to the full amount) under a Sales Tax code
Create a second rule for the county (1%), using the "below" option to cap the taxable base at $5,000, based on unit price
Optionally check Print Separate on Invoice so the state and county amounts show as separate line Items for the client
Design Manager applies this correctly across different scenarios automatically once the rule is set up:
An Item over $5,000 (e.g., $7,000): 6% of $7,000 + 1% of the $5,000 cap = $420 + $50 = $470
An Item under $5,000 (e.g., $4,000): 6% of $4,000 + 1% of $4,000 = $240 + $40 = $280
Multiple individual units not considered a set (e.g., 4 Items totaling $12,000, or $3,000 each): 6% of $12,000 + 1% applied per unit ($30 × 4) = $720 + $120 = $840
The key setting for that last scenario is marking the Item's quantity correctly so Design Manager knows to apply the per-unit surtax rule to each unit individually rather than to the combined total.
Bottom line: Whenever your jurisdiction has a state rate plus one or more local surtaxes, especially with thresholds, unit-based rules, or different treatment for "sets" vs. individual Items, build each authority as its own rule within the code rather than trying to calculate a single blended percentage. This keeps the math accurate, keeps your Sales Tax report broken out by authority, and lets you show tax separately to clients on the Invoice if needed.
Showing Sales Tax on a Proposal
Sales Tax doesn't always display on a Proposal by default; it depends on the Project's Sales Tax code selection and Project settings.
To show tax on a Project's Proposal:
Find and open the Project
Go to the Info tab and confirm there is a Sales Tax code selected
Go to the Settings tab and confirm that Include Sales Tax in Deposit is checked. This is important if you want Sales Tax to be included in the requested deposit. If this is not checked, Sales Tax will show at the bottom of the Proposal but will not be included in the requested deposit
In the Settings tab, click on Advanced / Mark-up. Click on the Proposal tab and make sure the option, 'Suppress Sales Tax' is not checked
Confirm the relevant Item Components are tagged taxable in their Component specifications
If the Proposal was already created, edit and re-save it to update with any changed settings or Components
Reviewing the Sales Tax Report
Once Invoices are posted, the Sales Tax Report (found under Accounts Receivable Reports, worth adding to your Favorites menu for quick access) is where you'll pull the numbers needed to actually remit tax.
A few things to know about how it's organized:
The report breaks into a new page per Sales Tax Code, and groups/totals by state abbreviation, so if you have multiple codes within one state (e.g., a general code plus a Philadelphia County code), you'll see each code's detail as well as a combined total for that state.
When a code has multiple rules (e.g., state + county), the report shows each rule's contribution separately, so you can see exactly what portion is owed to each taxing authority.
The report lists every Invoice with a date in the selected range and groups Invoices by the Sales Tax Code used on the related Project.
This is one of the main reasons to keep old and new rate codes separate when rates change (see Updating Sales Tax Codes When Rates Change) and to keep state/local rules separate within a code (see Advanced Scenarios), which keeps this report accurate and easy to reconcile against what you actually owe each authority.
Remitting Sales Tax Payments (and Use Tax)
Charging and recording Sales Tax correctly is only half the job; the other half is actually remitting the collected tax to the appropriate authorities. How you plan to pay determines how you should set things up in DM.
Most states now offer electronic filing/payment through a single state website. For example, Pennsylvania's Department of Revenue lets you file and pay online, and if your liability exceeds a certain threshold, you're required to use it. Importantly, the state handles redistributing funds to local municipalities (like Philadelphia or Allegheny County) on your behalf. That means even though your Sales Tax Report breaks out amounts by authority (state vs. county), you may only need one vendor for the whole state, since you're only cutting one payment.
If instead you pay each authority individually (separate checks to the state, a county, a city, etc.), set up a separate vendor for each authority you pay directly. Either approach is valid in DM; it just needs to match how you actually remit.
Setting up vendors
Go to Projects and click on Vendors to add a tax authority vendor.
When creating one, give it a clear code/name (e.g., "Florida Department of Revenue, FLTAX"). You can select the default expense account of the vendor under the Defaults tab.
Using the Sales Tax Report to determine what's owed
Before remitting, run the Sales Tax Report (Accounts Receivable Reports) for the period you're filing (monthly, quarterly, etc.). This is exactly the information you'll need to fill in on a state's e-filing site, including both total sales and taxable sales for each authority, since local rules with thresholds or per-unit calculations (see Advanced Scenarios) can make taxable sales differ between the state and a county even on the same Invoice.
Recording the payment
Go to Accounting and click on Vendor Deposits & Invoices
Click Add (top right) and select Expense/Bill/Miscellaneous
Select the vendor as your tax authority
Enter an Invoice Number (e.g., "FL Q1 tax bill")
Select the Invoice date and choose the Pay With account used to pay
Click Add and select the Sales Tax GL account (e.g., "Sales Tax Collected (21000)")
Enter the amount paid to the Sales Tax authority under Amount/Cost
Click OK
Review the entry, click Save, then Post the bill
Once posted, each liability account's collected tax (from Invoices) is offset by the payment (the operating expense).
Use Tax
Some states also require use tax, owed when you purchase something out of state (so no Sales Tax was charged) for your own business use, not for resale. Conceptually, it's the tax you would have paid had you bought the Item in-state.
Example: You buy $100 of business cards online from an out-of-state vendor. Had you bought them in-state, you'd have paid 7% tax ($107 total). Since the vendor didn't charge tax, you still owe that $7 to your state as use tax.
To record this in DM:
Confirm you have a GL account for Use Tax (create one if you don't, click here to learn how to create a GL account)
When entering the bill:
Distribute the actual charge (e.g., $107) to the normal expense account (e.g., Office Supplies)
Add a second, negative distribution to the Use Tax Liability account for the tax amount (e.g., -$7)
This nets your true cash outlay to what you actually paid the vendor ($100), while building up a balance in the Use Tax Liability account representing what you'll owe when you file.
To see what's accrued and due, run an Account Inquiry report (General Ledger Reports) on the Use Tax Liability account. Between that and the Sales Tax Report, you have everything needed to complete your filings. Once you know what's owed, record the remittance as an operating expense using the same steps outlined above under Recording the payment.
Troubleshooting: Sales Tax Missing or Not Calculating Correctly
If tax is missing or not calculating as expected, the issue almost always traces back to one of two areas; check them in this order.
Step 1: Sales Tax Code & Project settings
On the Project's Info tab, confirm:
The correct Sales Tax code is selected. If not, select the right one; if it doesn't exist yet, add it under Accounting and Sales Tax Codes, then select it on the Project's Info tab
If the code shown is correct, check its percentage and taxable defaults under Accounting and Sales Tax Codes to confirm they're accurate
On the Project's Settings tab, check:
Include Sales Tax in Deposit: if unchecked, tax will show on the Proposal but won't be included in the total amount due
Advanced/Mark-Up → General tab: confirm the taxable settings for each Component type. These control whether each Component type is automatically marked taxable when new Items are created in this Project
Step 2: Items & Components
If the taxable defaults were wrong when Items were originally created, that error carries into the Items themselves. Edit each affected Item and its Components and correct the taxable checkbox as needed.
Final step
After making corrections, edit and re-save the Proposal so the changes take effect. If Sales Tax still isn't showing correctly after checking all areas above, contact Design Manager Support at Support@DesignManager.com.
Why Sales Tax on an Invoice Can Differ from the Original Proposal or Estimate
Sales Tax discrepancies between a Proposal and the resulting Invoice almost always come down to one of two things: the Sales Tax Code changed between the two, or additional taxable charges were added before invoicing that weren't part of the original Proposal.
Common causes
1. Changes in Sales Tax Code
A Proposal or estimate reflects whichever Sales Tax Code is assigned to the Project at the time it's created. If the Project's code is updated afterward, say, to reflect a rate change, any Invoice generated later will use the new code, even though the original Proposal was calculated under the old one.
Example: A Proposal is created while the Project's tax code is set to 8.875%. Before the Invoice is generated, the code is updated to 8.0%. The Invoice will now reflect 8.0%, creating an apparent mismatch with the original Proposal.
2. Inclusion of additional charges
Charges added before invoicing, most commonly freight, increase the taxable total, which increases the calculated tax even if the tax rate itself hasn't changed.
Example: A Proposal only included merchandise, so tax was calculated on that amount alone. Freight was added at invoicing time, increasing the taxable total and, with it, the tax amount, even though the rate stayed the same.
3. Timing of tax code updates mid-Project
On longer Projects, it's common to update the Sales Tax Code partway through. Invoices created before the update reflect the old rate, and Invoices created after reflect the new one, so two Invoices on the same Project can legitimately show different tax amounts.
How to resolve a discrepancy
Adjust Invoices billed incorrectly: Generate a credit memo to reverse the incorrect Invoice, then update the Sales Tax settings, recalculate, and issue a corrected Invoice using the correct tax code.
Communicate with the client: When a discrepancy occurs, let the client know it's due to a tax code update or the addition of taxable charges like freight, so the difference doesn't come as a surprise.