Landed costs examples
Overview
Purchases for Freight and Customs Duty must be entered correctly in order to calculate landed costs, and also to ensure that the correct tax is applied when importing to your Accounting Software.
This article gives examples of what an import costs purchase order may look like in Australia, New Zealand, the UK, and the USA. We recommend reading our Apply import costs to a purchase order article for an overview of the process.
The following examples assume that the customs duty is charged in the same invoice as freight. However, this won't necessarily be the case if you pay separate suppliers for these fees.
Australia
Here is an example of a typical US import costs purchase order.
The first line here represents the cost of the freight. The Tax rate is GST Free Purchases, as the cost of Freight is not taxed.
In the second line, Customs Duty has been entered. Because the product name includes 'customs' the cost will be applied across all products in PO-416 in proportion to the value of the products.
The third line represents GST Paid on Imports. This is not applied to the original Purchase Order. It's tax rate has been assigned GST Paid on Imports in the Account column.
The final line has been entered without creating a product in the Products module, hence there is no code in the code column. It is completely fine to do this non-recurring fees! It has not been applied to the original Purchase Order, but you could do this too if necessary.
Note that at position 5 the only GST on the order is for the Additional Fees.
New Zealand
Here is an example of a typical New Zealand import costs purchase order:
The first line here represents the cost of the freight. The Tax rate, in the Account column, is GST Zero Purchases, as the cost of freight is zero rated.
In the second line, Customs Duty has been entered. Duty is exempt of tax - so in the Account column, the Tax Rate Exempt Purchases has been used.
The third line represents GST Paid on Imports. GST amounts should not contribute to the landed cost of a product, so has not been applied to the original Purchase Order. It's tax rate has been assigned GST Paid on Imports in the Account column.
The final line has been entered without creating a product in the Products module, hence there is no code in the code column. It is completely fine to do this for non-recurring fees! GST will be charged on this line, so no alternative account needs to be chosen.
Note that at position 5 the only GST on the order is for the Additional Fees.
UK
Here is an example of a typical UK import costs purchase order:
The first line here represents the cost of the freight. The Tax rate, in the Account column, is VAT Zero Purchases, as the cost of freight is zero rated.
In the second line, Customs Duty has been entered. Duty is exempt of tax - so in the Account column, the Tax Rate Exempt Purchases has been used.
The third line represents VAT Paid on Imports. VAT amounts should not contribute to the landed cost of a product, so this has not been applied to the original Purchase Order. It's tax rate has been assigned VAT on Imports in the Account column.
The final line has been entered without creating a product in the Products module, hence there is no code in the code column. It is completely fine to do this for non-recurring fees! VAT will be charged on this line, so no alternative account needs to be chosen.
Note that at position 5 the only VAT on the order is for the Additional Fees.
USA
Here is an example of a typical United States import cost purchase order:
Note how, like any other purchase, this order is Exempt of Tax.
The line at position 2 represents the cost of the freight.
The line at position 3 represents Customs Duty.
The final line has been entered without creating a product in the Products module, hence there is no code in the code column. It is completely fine to do this for non-recurring fees!
FAQs
I can't find any tax rates in the accounting drop-down?
You'll need to set up alternative tax rates first before applying them to line items.