Tax Exemptions
Define tax exemptions to fully or partially exempt a customer, item, or range of items from specific tax codes. You can create exemptions against customers or items for either locations or specific tax codes.
To use customer exemptions, set the Use Customer Exemptions system option to 'Yes.' To use product exemptions, set the Use Product Exemptions system option to 'Yes.' To exempt customers or products from tax codes with a type of 'VAT' or 'Sales,' set the appropriate Use Tax Code system option to 'Yes.' See: Tax System Options.
To exempt a customer from all taxes, use the Customers window to assign this customer to a tax code with a zero tax rate. To exempt an item from all taxes, use the Items window to assign this item to a tax code with a zero tax rate. See: Items.
You can only define a tax rate exemption for items that are invoiceable and have a status of 'Active.' In addition, if you create more than one exemption for the same customer, item, tax code, reason, or certificate number, the date ranges of these exemptions cannot overlap.
You can also use the Tax Exemptions window to update the status of your exemptions. If you need to add an exemption number to an Unapproved exemption created in the Transaction window, you must change the status of this exemption to 'Expired' and recreate the exemption with the number.
Prerequisites
To define an exemption for a customer:
1. Navigate to the Tax Exemptions window.
2. Choose to create Exemptions By Customer.
3. Enter the customer Name or Number.
4. To view existing exemptions for this customer or item(s), choose Find.
5. Enter the Locations for which this exemption will be valid (optional).
6. Enter the Site to exempt (optional). Leave this field blank to exempt all of this customer's sites or if you want to create a regional exemption using the Location flexfield (see previous step).
To define an exemption for an item:
1. Choose to create Exemptions By Customer.
2. Choose to create Exemptions By Item.
3. Enter the Item, or select from the list of values.
4. To view existing exemptions for this item, choose Find.
5. To create a new exemption, choose New Record from the Edit menu.
To define an exemption for a range of items:
1. Choose to create Exemptions By Range.
2. Enter the Category and Category Set to which the range of items belongs (optional). (You use categories to group items with similar characteristics; a category set is a group of categories.)
3. Enter the User Item Type. For example, Finished Good, ATO Model, or Subassembly.
4. Enter the range of Items for this exemption.
Defining an Exemption
1. Enter the Tax Code from which you are partially or fully exempting this customer or item(s). You can enter exemptions for VAT tax codes, or for location based tax, using your 'Location' tax code.
2. Enter the tax code percentage to exempt. You must enter a percent between 0 and 100.
3. Enter an exemption Number (optional).
4. Enter a Reason for this exemption, or select from the list of values.
5. Enter the range of Effective Dates for this exemption. The default start date is today's date, but you can change it. If you do not enter an end date, this exemption will be valid indefinitely.
If an exemption exists for an item, the new exemption you define takes precedence. For example, item A1 has an exemption with no ending effective date. If you define an exemption for this item with an effective start date of January 1, 1996, Receivables sets the existing exemption's end date to December 31, 1995, and creates the new exemption with the effective dates that you specify.
6. Enter a Status for this exemption.
Unapproved: Exemptions created automatically during Invoice entry or import are recorded as Unapproved. Exemptions with this status may be changed to any of the statuses listed here.
Manual: This exemption has been approved but Receivables will not automatically use it. You have to explicitly use this exemption. Exemptions with this status can only be changed to Primary or Expired.
Primary: This exemption has been approved and Receivables will automatically calculate tax. Exemptions with this status can only be changed to Manual or Expired.
Expired: Discontinue a previously approved exemption. Once discontinued, their status cannot be changed.
Rejected: Reject an Unapproved exemption. Once rejected, their status cannot be changed.
See Also
Customer Exemption Certificates
Calculating Tax
Tax Rate Exceptions
Tax Exempt Customer Report
Tax Exempt Product Listing