Using the Automatic Tax Calculation Feature to Enter Tax
Payables automatically creates tax distributions for you differently depending on what Calculation Level you use:
Invoice Header Level Automatic Tax Calculation
If you enable the Automatic Tax Calculation feature, and have Payables automatically calculate tax at the invoice header level, Payables will automatically calculate the Tax Amount for you based on the Tax Name you enter for an invoice. Payables then creates a tax distribution based on the Tax Name and Tax Amount in the Invoices window.
Prerequisites
Automatically entering taxes at the Header Calculation Level:
1. In the Invoices window enter all basic invoice information (see Entering Basic Invoices), but do not enter the distributions yet.
Accept the default Tax Name, if there is one, or enter a sales or user-defined Tax Name. Payables automatically calculates and enters the Tax Amount based on the Invoice Amount and the tax rate assigned to the tax name.
If you have enabled the Allow Override option at the supplier site, when you navigate to the Tax Name field, Payables opens a window that asks you at what level you want to calculate tax. Select Header.
3. Choose the Distributions button to navigate to the Distributions window. Payables automatically creates one tax type distribution based on the Tax Name and Tax Amount in the Invoices window.
4. You can adjust the tax distribution and add new tax distributions. The amount of each tax distribution must equal the sum of the non-tax distributions with the same Tax Name multiplied by the tax rate associated with the Tax Name, or Approval will apply a hold to the invoice.
Distribution Line Level Automatic Tax Calculation
When you enable the Automatic Tax Calculation feature, and Payables calculates at the Line level, Payables automatically creates Tax type distributions for you based on non-Tax (Item, Freight, or Miscellaneous type) distributions you enter. You use the Includes Tax check box to indicate whether each non-Tax distribution amount is inclusive of or exclusive of tax. If the non-Tax distribution amount includes tax, when Payables creates the Tax distribution it will also subtract the calculated tax amount from the non-Tax distribution, and uncheck the Includes Tax check box for the distribution.
Payables automatically creates tax distributions for you when you choose the Calculate Tax button, or, if you do not press the button, Payables creates tax distributions during Approval. When you use the Calculate Tax button and when you submit Approval, Payables calculates tax only for distributions for which it has not already calculated tax.
Prerequisites
Automatically entering taxes at the Line Calculation Level:
1. In the Invoices window enter all basic invoice information (see: Entering Basic Invoices). If you have Invoice Header as your highest ranking applicable tax Name Default Source and you want Payables to default a Tax Name to all distributions you enter, enter a Tax Name. Since you are using Line Level calculation, you cannot enter a Tax Amount.
If you have enabled the Allow Override option at the supplier site, when you navigate to the Tax Name field, Payables opens a window that asks you at what level you want to calculate tax. Select Line.
3. If you are still in the Invoices window, choose the Distributions button to navigate to the Distributions window.
Attention: Do not enter any Tax type distributions manually if you use Line level calculation.
5. For every non-Tax distribution enter a Tax Name, or accept or change the default if there is one. If you have a tax-exempt distribution, enter a zero-percent Sales tax name or a zero-percent user-defined tax name.
6. Check the Includes Tax check box for each non-Tax distribution with an amount that includes tax. You can adjust this option only if the Allow Override (for Distribution Amounts Include Tax) Payables option is enabled.
7. If you want Payables to create your tax distributions now, choose the Calculate Tax button. If you do not use the Calculate Tax button, Payables will automatically create tax distributions during Approval.
For each Tax Name, Payables creates one tax distribution for all distributions that are inclusive of tax, and one tax distribution for all distributions that are exclusive of tax. The new distributions have the same Tax Name as the distributions from which they are calculated.
For distributions that do not have the Includes Tax check box checked, Payables calculates the tax amount by multiplying the invoice amount by the tax rate associated with the Tax Name.
For distributions that have the Includes Tax check box checked, Payables calculates the tax amount using the following formula: Tax Amount = Distribution Amount x Tax Rate/(100 + Tax Rate). For the distributions that include tax, Payables then subtracts the calculated tax amount from the distribution amount, and unchecks the Includes Tax check box.
See Also
Automatic Tax Calculation Overview
Set up Automatic Tax Calculation. See: Setting Up Automatic Tax Calculation.