Customs and Freight Charges

This method covers the purchase of imports where you want to include tax, freight, and insurance in the inventory value for imported inventory items.

To enter an Import Purchase where you would like the inventory value to include other costs often billed by a customs agent:

Setting up the inventory item

  1. Set up the inventory item as –no tax code– since tax is not payable to the offshore supplier in this example (i.e. it is a foreign tax you don’t care about and/or don’t need to track).
  2. Ensure you don’t inventory it (do not tick ‘Include this item in my Balance Sheet’) as you don’t carry this as stock.
  3. Tick ‘I Buy’ and/or ‘I Sell’ otherwise it will not show up when invoicing. Choose the appropriate ledger accounts.
  4. Lastly, make sure ‘Visible’ and ‘Active’ are both ticked before saving.

Add a purchase for the goods or services:

Quantity Item Description Tax Code Unit Price % Disc. Line Total
10 SRW1 Small Red Widget {leave blank} 50.00 500.00
Total Amount Incl. Tax: 500.00
Total Tax: 0
  1. Later when we receive our customs and freight invoice we can establish the tax charged ($50 in this example) and adjust the inventory value to reflect this. By doing this, you are effectively removing the inventory with no tax code and putting it back in as having tax, using the appropriate tax code for your zone.
  2. Add a purchase to capture tax, freight, and insurance.
    Quantity Item Description Tax Code Unit Price % Disc. Line Total
    -10 SRW1 Small Red Widget {leave blank} 50.00 -500.00
    10 SRW1 Small Red Widget Your Zone Tax Code* 55.00 550.00
    1 AIR Freight Air Your Zone Tax Code* 22.00 22.00
    1 INS Insurance Your Zone Tax Code* 11.00 11.00
    Total Amount Incl. Tax: 83.00
    Total Tax: 53.00

    In the above example we established from our customs invoice that $50 Tax is being charged. If this is the case, you only want to do the remove and add back line items in the appropriate amount that reflects the tax portion. In other words, in the example above, if it were only $30 tax (not $50) you would only remove $300 worth of inventory and add $330 of inventory back with your zone tax code.

Customs Broker Transactions

There are situations in a Import/Exports business where a lump sum amount of tax is charged and 100% of it needs to be paid to Customs, as well as being recorded in the books. In this example you are sent a bill from Customs as follows:

Item Tax Amount inc Tax
Freight 5.00 55.00
GST on Imports 200.00 200.00
TOTAL 205.00 255.00

Of the $255 a GST amount of $205 is to be captured. Enter in this invoice this invoice as follows but make sure you un-tick the ‘Amounts include GST’ box.

There are two line entries for GST. One offsets the other so that as a result we have captured $200 in the ‘Total GST’ section, and our totals are still correct.