This chapter contains this topic:
This chapter briefly describes the setup activities you must perform to process taxes correctly. The following chapters describe these setup activities:
Tax Authorities. You must define each of the government agencies that assess and collect taxes.
Tax Rates and Areas. You must define the tax rates and effective dates for the taxes that the government agencies assess. You have the ability to set up compound taxes (assess a tax on a tax), to establish input credits, and to identify the maximum amount that an item can be taxed.
Tax Explanation Codes. Tax explanation codes control how a tax is assessed and how it is distributed to the general ledger accounts. The JD Edwards World software provides a number of tax explanation codes. Because the tax explanation code is a user defined code (system 00, type EX), you can set up additional codes to meet your business needs.
Automatic Accounting Instructions (AAIs). AAIs point to the appropriate accounts in the chart of accounts and define the rules for automatically-generated journal entries. The methods and naming conventions for AAIs differ for the A/R, A/P, Sales Order Management, Purchase Management, and General Accounting systems. To successfully process taxes, AAIs and accounts are critical.
Tax Rules by Company. The tax rules define to the system how to calculate taxes where discounts exist, and how to calculate discounts where taxes exist. These rules also control the acceptance of variances between system-calculated and user-entered tax amounts.
Default Codes/Rates. You can set up default tax values for customers and suppliers. When you use entry screens, the system will automatically display the defaults you defined. You can either accept or override the default values at the time you enter transactions.