Tax System Options
Use the Tax alternative region to define how Receivables calculates taxes. You specify your tax method, the Location Flexfield Structure to use to determine your taxes for different customer locations, and whether to compound taxes for your customers. You can also choose to recognize tax exception rates for customers, customer sites, specific locations, and products, and whether exemptions that you define for specific products or customers should take precedence.
To define your tax system options:
1. Open the Tax alternative region, then enter your Tax Method. Choose either 'Sales Tax' or 'VAT' (value added tax). Receivables uses this tax method, along with the value you entered for the Calculate Tax field assigned to your transaction type, to determine whether to calculate tax for your transactions. See: Transaction Types.
Note: If you update this value after you initially enter a tax method, Receivables ensures that it uses the correct tax hierarchy for the new tax method.
2. Enter your sales tax Location Flexfield Structure. You can use this to validate customer addresses as well as calculate sales tax based on your customer's shipping address. Alternatively, you could perform address validation using flexible address formats. See: Flexible Addresses.
Receivables requires that you define the segments of your sales tax Location Flexfield structure from the top down. For example, if you are defining a Sales Tax Location Flexfield structure that includes state, county and city, define your state segment first, followed by the county segment, and then the city segment. For more information, see: Defining a Sales Tax Location Flexfield Structure.
3. Enter the Postal Code Range that you want to be the default value when entering sales tax rate assignments in the Tax Locations and Rates window.
4. If you are not using a flexible address format for validation, enter the type of Address Validation to use. This option is only valid for addresses in your home country. Enter one of the following:
Error: Receivables displays an error message when you enter an invalid address format. If the location combination does not exist for the customer's Ship-To address, Receivables displays an error message and prevents you from saving the record.
Warning: Receivables displays a warning message if a tax rate or location is not defined for this address. However, you can save the record. Receivables will create locations that were not defined.
No Validation: Receivables does not validate the address.
Attention: If you do assign a flexible address style to your home country to validate address information, you should use the correct Sales Tax Location Flexfield structure. See: Flexible Addresses.
Warning: If you modify your address validation level, previous addresses will not be affected by the new setting. For example, you update your Address Validation option from 'No Validation' to 'Error'. When you enter an invalid address, Receivables will display an error message and require you to reenter the address, even if it is one you have entered previously.
5. To compound taxes in Receivables, check the Compound Taxes check box. Compound taxes are taxes that are based on other taxes. If you check this check box, Receivables lets you assign precedence numbers to your tax lines when entering invoices.
6. Enter the Invoice Printing method to use. This is the method Receivables will use when printing tax amounts on your invoices. The value you enter here becomes the default for your customer profile classes. Choose one of the following methods:
European Tax Format: Print tax information in the following format: Tax rates printed as the last column of invoice lines, freight items printed last, and the taxable amount with the summarized tax codes printed at the end of the invoice.
Itemize By Line: Itemize tax information for each invoice line. Receivables displays this information after each invoice line.
Itemize and Summarize: Display both itemized and recap tax information.
Summarize by Tax Code: Display all tax information under the heading 'Tax Summary by Tax Code.' If you have two tax lines with the same tax code, rate, exemption, and precedence number, Receivables will group them together.
Summarize By Tax Name: Display all tax information under the heading 'Tax Summary by Tax Name.' If you have two tax lines with the same tax name, rate, exemption, and precedence number, Receivables will group them together.
Total Tax Only: Display only the total tax amount at the bottom of the document.
7. Enter the Tax Cache Size (amount of memory, in bytes) to allocate to the Receivables tax program. Receivables uses this memory to store Sales and Value Added tax rates to speed tax calculations. The default is 1000 bytes.
8. If you charge your customer's tax and want to print a registration number on their invoices, enter a Tax Registration Number.
9. Enter the Tax Vendor View that you will use to calculate tax, or select one from the list of values. When you manually enter, import, or copy transactions, your Tax Vendor calculates and returns the appropriate tax rate and amount. Receivables uses this information to create the tax line(s) and related accounting information for your transactions. See: Preparing Receivables in the Tax Vendor Extension essay.
10. Check Inclusive Tax Used check box if you use inclusive tax codes (optional). This option determines at what point Receivables updates the total line amount in the Lines window when you add, update, or delete a tax line. If this option is Yes, Receivable does not update the 'Lines' total until you save your work; otherwise, Receivables enters a null value when you make the change, then updates the total when you save your work.
12. Open the Tax Defaults and Rules alternative region, then choose whether to Enforce Tax from your Revenue Account. You can optionally set up your system to ensure that the tax code for your invoice lines is the same as the tax code assigned to the 'Account' segment of your Revenue account. See: Setup Steps for Value Added Tax.
13. Define your default tax options and Hierarchy by checking the appropriate check boxes and entering a sequence number for each. This hierarchy determines the order in which Receivables derives a default tax rate when you manually enter transactions or import them using AutoInvoice.
For example, if Tax From Customer Site is Yes and you specify that it is number 1 in the hierarchy, Receivable will first check if a tax rate is defined to the customer site for this transaction. If no tax rate exists at this site, Receivables looks at the next location in the sequence, and so on.
Tax From Customer Site: Use the tax rate defined at the customer address level.
Tax From Customer: Use the tax rate defined at the customer level.
Use Tax From Product: Use the tax rate defined at the item level.
Tax From Revenue Account: Use the tax code assigned to the natural account segment of your Revenue account.
Tax From System: Use the tax code that you entered in the System Options window (see next step).
14. If your Tax Method is VAT, enter a default Tax Code (optional).
15. Define your Exception Rates by checking the appropriate check boxes:
Use Customer Exemptions: Check this check box to include customer exemptions when calculating tax for your transactions. Use the Tax Exemptions window to exempt customers and items from specific tax. If you do not check this check box, you cannot set the Default Tax and the Tax fields in the Transaction window to 'Exempt'.
Use Product Exemptions: Check this check box to include item exemptions when calculating tax for your transactions. Use the Tax Exemptions window to exempt customers and items from specific tax.
Use Item Tax Rate Exceptions: Check this check box to use the tax rate you defined for specific products based on the customer's Ship-To address. Use the Item Tax Rate Exceptions window to enter tax rates for specific items based on Ship-To address.
Tax Rounding System Options
Use the Rounding Options region to define how Receivables calculates your tax amounts. You can choose to round tax calculations at the line or header level, specify a rounding method, and the number of decimal places to display.
If you set Allow Override to Yes, you can also set these options at the customer or customer site level. The values you enter at the customer or site level take precedence over the values you enter here. See: Entering Customers.
If you pass tax amounts into Receivables using AutoInvoice, Receivables will not recalculate tax. When importing Tax Lines into Receivables, you must disable automatic tax calculation using a transaction type that has Automatic Tax Calculation set to No. Any rounding used in the original system will be brought into Receivables unchanged. See: Importing Transactions Using AutoInvoice.
To define tax rounding system options:
1. Choose a Calculation Level. Choose Line to calculate tax for each invoice line (this is the default). Choose Header to calculate tax once for each invoice for each rate.
2. Choose a Rounding Rule. Choose from the following rules:
Up: Choose this option to round tax calculations to the greater amount.
Down: Choose this option to round tax calculations to the lesser amount.
Nearest: Choose this option to round calculations to the nearest decimal point or integer.
For example, in the following table the Reporting Currency is the US dollar, Precision is set to 2, and the Minimum Accountable Unit is .02:
|
| Up
| 3.444, 3.445, or 3.446
| 3.45
|
| Down
| 3.44, 3.445, or 3.446
| 3.44
|
| Nearest
| 3.444
3.445
3.446
| 3.44
3.45
3.45
|
3. Enter your Reporting Currency (this is the same as your functional currency).
4. Enter the standard Precision to use for tax calculations in this currency. This is the number of digits to the right of the decimal point that are used in regular currency transactions. The standard precision must be greater than or equal to zero, and must be less than or equal to your functional currency precision. For example, if your functional currency is USD, enter a number less than or equal to 2. (If your Reporting Currency is USD, 2 is the default.)
5. Enter the Minimum Accountable Unit for tax rounding in this currency. This is the smallest denomination used in this currency (this might not correspond to the standard precision). This must be greater than your functional currency minimum accountable unit. For example, if your functional currency is USD (Precision = 2), your Minimum Accountable Unit must be .02 or greater.
6. To be able to specify Tax Calculation and Tax Rounding at the customer or site level, check the Allow Override check box. If you do not check this check box, Receivables disables the Tax Calculation and Tax Rounding fields in the Customers window.
See Also
Transactions and Customers System Options
Miscellaneous System Options
Accounting System Options
Calculating Tax
