Calculating Tax
Receivables gives you the flexibility to implement tax solutions for Value Added Tax (VAT) or Sales Tax systems. When calculating VAT, tax codes are assigned to customers, sites, and inventory items. These tax codes are then used to control which VAT rate is applied to each invoice. When calculating Sales Tax, the Customers ship-to address and any predefined exceptions are used to control which Sales Tax rate to apply to the invoice. Both methods will take into account any customer and item exemptions you have defined.
Following are some of the major features of the Receivables tax engine.
Calculate Tax Based on Location
Receivables can calculate tax based on different components of your customers shipping addresses for all addresses in your home country. To calculate sales tax, you choose a Sales Tax Location Flexfield structure that includes the components you want Receivables to use when calculating tax. For example, in the United States sales tax is usually calculated by adding the tax rates assigned to the shipping state, county, and city.
Calculate Tax Based on Codes
Receivables can also calculate tax based on tax rates you assign to user definable codes. These tax codes can then be assigned to specific items, customers, and customer sites. For example, in many parts of Europe, tax depends on the item and is called Value Added Tax (VAT). Tax codes can also be used in a location-based tax system.
Calculate Tax Based on Revenue Account
You can set up your system to derive your tax code from the 'Account' segment of your Revenue account. If you set up your system this way, Receivables will use this tax code as the default when you enter or import transactions. You can also set up your system to ensure that the default tax code is always derived from your Revenue account.
Calculate Tax Externally
Receivables can integrate external tax calculation programs using the Tax Vendor Extension. This lets you provide for complex tax calculation needs while retaining the full power of Receivables to create and store all other tax data.
Compound Tax
Receivables lets you create compound tax charges during invoice entry and import if the Compound Taxes system option is set to Yes. You can assign precedence numbers to indicate which tax line you want Receivables to compound.
Credit Tax
When you credit a transaction that was previously taxed, Receivables will automatically credit the original taxed amount, so you do not need to consider any change in tax rates which may have occurred in the interim.
Calculate Multiple Tax Rates
Receivables lets you assign multiple tax rates and tax accounts to each invoice line. You might want to distribute your tax amounts to different accounts for reporting purposes.
Create Tax Groups
Define tax groups to apply multiple taxes to a transaction or line item. Within each tax group, you can include one or more tax codes that Receivables applies based on the transaction's Ship To location.
Create Tax Exemptions
Tax exemptions let you fully or partially exempt specific customers or items from tax. You can use exemptions in either a VAT or location based tax system.
You can define exemptions either at the customer or item level, or specify them at the regional levels. For example, you could create an exemption for a customer such that the customer is always exempt from tax or is exempt only in the state of California.
Create Tax Exceptions
Tax exceptions are special tax rates that are assigned to items being shipped to specific addresses. Tax exceptions are only used when you are calculating location-based tax. You can create an exception for specific items and shipping destinations.
Inclusive Tax
Receivables lets you enter and display transaction lines either inclusive or exclusive of tax. Tax inclusive indicates that the line amount for an item includes the tax for this item. Tax exclusive indicates that tax is not included in the line amount for this item. You can define both tax inclusive and exclusive tax codes in the Tax Codes and Rates window.
See Also
Defining a Sales Tax Location Flexfield Structure
Tax Codes and Rates
Implementing the Tax Vendor Extension
Tax Groups
Integrating Receivables Applications Tax Information Using Sales Tax Rate Interface
Tax Exemptions
Tax Rate Exceptions
Importing Tax Lines
US Sales Tax Reconciliation
Tax Inclusive
