Overview of Tax Reconciliation
Identifying Sales Tax Related Transactions
The US Sales Tax Report lists the gross, taxable, exempt and tax amounts for a given period to enable you to identify and review your sales tax liability to the various tax authorities around the US.
Preparing Sales Tax Returns
The US Sales Tax Report includes all Invoice, Debit Memo, Credit Memo and Adjustment transactions broken down by state, county and city to provide a basis for preparing the Sales Tax Returns for each state.
Posting Sales Tax Transactions to the General Ledger
Receivables lets you assign a unique general ledger account or sub-account for each state's sales tax liability using the Locations and Rates window. See: Tax Locations and Rates.
Using the qualifier, 'Tax Accounting at this Level,' you control which tax account is assigned to which segment of the sales tax location flexfield. As shipped, Receivables sets this qualifier to the state segment of the default flexfield structure, State.County.City. This setup allows you to create a unique general ledger account for each state and minimizes your setup effort.
Controlling Tax Adjustments
The US Sales Tax Report provides the parameter 'Sales Tax Liability Account Range' to let you control which tax adjustments are included in your Sales Tax return.
Reconciling Sales Tax Returns to the General Ledger
The US Sales Tax Report provides you with all of the transaction detail from the Receivables subledger to enable you to reconcile your Sales Tax Returns to the general ledger. The US Sales Tax Report enables you to identify any tax transactions not posted to the appropriate sales tax liability account.
Tax Adjustments
An adjustment is a Receivables feature that lets you increase or decrease the amount due of your invoice or debit memo. Any adjustments that have been applied to the tax lines of an invoice and cannot be claimed from the state should not be posted to a sales tax liability account (for example, bad debt write-offs of sales tax amounts).
A user procedure should be implemented to ensure that the tax department authorizes all adjustments posted to the sales tax liability accounts.
If you apply an adjustment to the tax lines of an invoice within Receivables, the US Sales Tax Report will prorate the tax adjustment across each of the individual tax lines of the adjusted invoice. Therefore, in the case of an invoice with multiple tax lines, each tax line will be partially adjusted.
District Taxes
The SQL*Loader control files that Receivables provides for uploading sales tax rate data from tax vendors combine the City, District and Municipal sales tax rates into one composite City sales tax rate. The US Sales Tax Report displays the combined City and District taxes in the city totals. Secondary taxes levied by the ship-to city will be included in the total tax for the ship-to city. Secondary tax levied by the ship-from city will not be included in the US Sales Tax report.
For more information, see: Importing Address Validation Data and Sales Tax Rates.
Sales Tax Returns
The US Sales Tax Report can be used to prepare a manual sales tax return by running the report to include all authorized sales tax transactions posted during the prior period. Alternatively, third party vendors can download the output from this report and create signature-ready sales tax returns.
See Also
Reconciling Your Sales Tax Returns to the General Ledger
