Information on configuring Tax Inclusive taxes in RMS, including how the tax inclusive divisor is calculated.

Tax Inclusive properties advertise and charge a single price that already contains the tax. The guest, or customer, sees one amount, and RMS works backwards from that amount to split it into a net charge and a tax component.

Tax Inclusive is the standard tax method in Australia and New Zealand (GST), the United Kingdom and Europe (VAT), and most Middle East markets. It is the opposite of a Tax Exclusive property, where the tax is added on top of the advertised price at the point of sale.

Important! The following examples of tax setup are for demonstrative purposes only. Properties should consult their accountant for specific legislative requirements on taxes for their business, prior to completing tax setup in RMS.

Please Note! RMS is highly configurable. Some Terminology, User Access & Permissions, Images, Labels, and Functions used in these articles may differ from your setup. CLICK HERE to find out more.

Tax Inclusive vs Tax Exclusive

The tax method is set at property level and is chosen during onboarding. For the full setup of the property tax method, see Set up the tax method.

Important! Changing a property between Tax Inclusive and Tax Exclusive after go-live affects every existing rate, charge and transaction. Contact RMS Support before changing the tax method on a live property.

The Tax Inclusive Divisor

A Tax Exclusive tax is entered as a percentage, because the tax is calculated forwards from a net price. A Tax Inclusive tax is entered as a divisor, because the tax has to be extracted backwards out of a price that already contains it.

To find the tax contained in a tax inclusive price, divide the total by the divisor:

Tax amount = Total charge ÷ Divisor

To calculate the divisor for any tax rate:

Divisor = (100 + tax rate) ÷ tax rate

For example, a 12.5% VAT rate produces a divisor of 9, because (100 + 12.5) ÷ 12.5 = 112.5 ÷ 12.5 = 9.

Divisor Reference Table

Decimal Places

Some rates produce a divisor that does not terminate. A 15% rate gives 7.66667 and a 7.5% rate gives 14.33333, both rounded to five decimal places above. Enter as many decimal places as the field accepts: a shortened divisor produces a small error on every charge, which compounds across a reporting period.

Important! After entering or changing a divisor, post a test charge and check the tax amount against your own calculation before relying on the setup. This confirms the value RMS is applying matches the value you intended, which matters most on rates whose divisor does not terminate.

Worked Example

A property in a 20% VAT region sells a room at an advertised rate of 240.00 per night. The Tax Inclusive divisor is 6.

• Total charge = 240.00 (what the guest pays)
• Tax component = 240.00 ÷ 6 = 40.00
• Net charge = 240.00 - 40.00 = 200.00

RMS performs this split automatically every time a taxable charge is posted to the reservation account. The guest sees 240.00 on the Tax Invoice, with the 40.00 tax shown as its own line.

Tip! To check a divisor is correct, multiply the tax amount it produces by the divisor. The result should equal the original inclusive total.

Why a Tax Total Can Differ by a Few Cents

RMS calculates the tax on each transaction individually, rounds that result to two decimal places, and then adds the rounded amounts together. It does not calculate tax on the period total.

Per-transaction rounding means the tax figure on a report will not always match the figure you get by dividing the report's grand total by the divisor. The difference is the accumulated rounding from each individual transaction, and it grows with the number of transactions rather than the size of them.

Both figures are correct. The per-transaction total is the one that reconciles to the guest invoices, because that is the tax actually charged and posted.

Tip! To reconcile a report manually, apply the divisor to each charge line and round each result to two decimal places before adding them up. Dividing the grand total in one step will produce a small variance.

Where the Divisor is Entered

RMS holds a divisor in more than one place. Which one applies depends on whether you are setting the property's main tax rate, an individual tax record, or an override on a single charge.

1. The property's main tax rate

The property's main tax rate is the divisor most properties need, and it is the one that applies to standard accommodation and sundry charges.

1. In the side menu of RMS, go to Setup > Accounting > Accounting Options.
2. Select the property, then navigate to the Tax tab.
3. Set the Tax Option to Tax Inclusive.
4. Enter the divisor in Inclusive Full Tax rate. Divide total charge by.
5. Select Save/Exit.

Please Note! The wording of this field changes with the Tax Option. It reads Inclusive Full Tax rate. Divide total charge by on a Tax Inclusive property and Full Tax rate. Divide total charge by on a Tax Exclusive property. Both fields hold a divisor, not a percentage.

2. An individual tax record

Individual taxes, such as a city tax or a tourism levy, carry their own calculation basis.

1. In the side menu of RMS, go to Setup > Accounting > Taxes.
2. Select the tax to edit, or select Add to create a new tax.
3. Navigate to the Tax Types tab.
4. Enter the divisor in the Tax Inclusive (/) field.
5. Select Save/Exit.

Important! Tax Exclusive (%) and Tax Inclusive (/) are two separate fields and RMS does not calculate one from the other. Entering a percentage does not populate the divisor, and a value left in the unused field is ignored rather than applied. Enter the value that matches the property's tax method and check that the other field is not carrying a stale figure from an earlier setup.

The Taxes list shows the result in the Tax Type column in the format percentage Or divisor. A tax carrying only a percentage displays as "5%", and a tax carrying only a divisor displays as "Or 11".

3. An override on a single sundry

A single sundry charge can be taxed at a different inclusive rate to the rest of the property. Set the sundry's Tax Type to Tax Inclusive Divisor Override and enter the divisor in the Divisor field that appears.

Tip! Use a divisor override when one charge is taxed differently to accommodation, for example meeting room hire or equipment rental at a higher rate than the room.

Related Fields

• Round Down Net Rate to Nearest 100 when calculating as Inclusive (Tax Types tab) - rounds the calculated net amount down to the nearest 100 after the tax has been extracted. Used in currencies where the net figure is conventionally expressed in whole hundreds.
• Always Round Tax Down (Details tab) - rounds the calculated tax amount down to the nearest cent, regardless of standard rounding rules.

Please Note! The Use Divisor field on the tax record's Details tab is a different setting. It belongs to the Add Inclusive Tax to Tax Transaction option and is not the tax's own inclusive divisor.

Concessional Tax

Some regions apply a reduced tax rate to long-stay accommodation once the stay passes a threshold number of nights. In Australia and New Zealand this is known as Concessional GST.

Concessional tax is configured alongside the full tax rate under Setup > Accounting > Accounting Options > Tax. It uses two values rather than a second divisor: a reduction percentage that lowers the inclusive total, and a discount rate that extracts the reduced tax from that lower total.

For the full calculation method and worked examples, see GST Calculations (Tax Inclusive Setup).

To apply the reduced rate from the first night of a stay rather than from the threshold, see Reduce GST from Day 1.

Applying Taxes to Charges

Once the tax record is configured, allocate it to the items it should apply to:

• Set Up Taxes on a Category - applies the tax to accommodation charges.
• Set Up Taxes on a Sundry - applies the tax to extras and incidental charges.

Each tax can also be assigned a Tax Class or a Tax Grouping for reporting, and a tax schedule so a rate change takes effect automatically on a future date.

Channel Management

Properties using the RMS Channel Manager should check how inclusive tax is handled on rates sent to each Online Travel Agent (OTA) and on the totals received back on incoming bookings. For the Inc Tax and Reverse Calculate Taxes on Total Rate options, see Tax Settings in Channel Mapping.

Related Articles

• Set up the tax method
• Taxes - Tax Exclusive
• GST Calculations (Tax Inclusive Setup)
• Tax Examples by Country
• Set up a tax exemption
• Tax Audit Report