Working with Customer Tax Status

Purpose: The tax exemptions you can assign to a customer include reseller certificates, exemptions for nonprofit organizations, and exemption from VAT.

Exemption information set up in customer maintenance defaults in order entry and to orders you create through the order API, although you can override the information in order entry.

Web orders: Regardless of the tax status of the sold to customer, you can pass exemption/resale information on an order received through the Generic Order Interface (Order API) by entering E (Exempt) or R (Resale) in the tax_exempt attribute and defining a certificate number in the resale_exempt_id attribute. In this situation, the exemption/resale information applies to the order ship to only and does not update the exemption/resale information for the sold to customer on the order.

Exemption/reseller options: You can set up:

• a customer-level exemption if the customer always qualifies regardless of shipping address

• resale or exemption numbers in the Customer Tax table for individual states

• VAT exemption at the customer level, if the customer might be subject to VAT

Expiration date? Optionally, you can specify an expiration date for customer tax exemptions at either the customer level, or at the state or province level. If the expiration date at the customer level has passed, the customer is not eligible for a tax exemption set up at either the customer or state/province level.

GST or PST: For Canadian taxing, you can define exemptions from either Goods and Services taxes, Provincial Services taxes, or both.

If you use an external tax system: You can set up tax exemptions for specific customers if you use an external tax system. You can also use a customer class to flag customers who are exempt. See Vertex Setup or Avalara AvaTax Setup for more information.

In this chapter:

• Customer Tax Overview

- First Level: Customer Exemption

- Second Level: VAT

- Third Level: State Exemptions

• Work with Customer Tax Screen

• Create Customer Tax Screen

Customer Tax Overview

You can set up three levels of tax exemption information to default for a customer in order entry:

• Use the First Level: Customer Exemption if the customer is always:

- tax exempt

- not subject to tax as a reseller

- subject to GST or PST only

• Use the Second Level: VAT if the customer is always exempt from VAT on orders subject to VAT.

• Use the Third Level: State Exemptions if the customer does not have a customer-level tax exemption or reseller certificate, but is exempt or a reseller in specific states or provinces.

First Level: Customer Exemption

Tax exempt code and certificate number specified for the customer: If the customer is always tax exempt regardless of shipping address, set up the Tax exempt code and Exempt certificate field for the customer. Any reseller or exempt information in these fields defaults into the Tax code and Rsl/ex# fields in order entry and, as long as the Exempt expiry (Tax exempt certificate expiration date) is blank or specifies a future date, the reseller or exempt information remains on the order header when you select OK and the customer-level tax information applies.

Exempt certificate number but no Tax exempt code specified for the customer: If the customer has an Exempt certificate number but no Tax exempt code, the certificate number defaults in order entry, but the operator will need to complete the Tax code field. Setting up a customer record this way might be useful if you want to prompt the operator to evaluate the customer's tax status on an order-by-order basis.

Canadian tax exemptions for customers: If there is a Tax exempt code of GST only or PST only for a Canadian customer, this information defaults in order entry, regardless of the value in the Exempt expiry date field. These customers do not need to specify an Exempt certificate.

Overrides state-specific settings from the Customer Tax table: If you specify tax-related information at the customer level, this information overrides the information set up through the Work with Customer Tax Screen for specific states or provinces. For example, if the customer has an Exempt expiry (Tax exempt certificate expiration date) in the future, but the state-level Expiration date for the customer’s address is in the past, the customer is still eligible for a tax exemption, provided there is a Exempt certificate set up for the customer or a Resale/exempt # set up for the state.

If you would like the customer to qualify for tax exemptions in particular states only, the tax-related fields at the customer level (Tax exempt code, Exempt certificate, and Exempt expiry (Tax exempt certificate expiration date) should be blank.

Second Level: VAT

Vat number for the customer: If an order is subject to VAT, the system checks the VAT number field for the customer. An entry Indicates that the customer is exempt from VAT, a taxing method that applies in only certain states in certain countries. When an order is subject to VAT, the customer is charged a tax-inclusive price, and the tax amount is “hidden” on the order detail line for the item, not included in the Tax bucket for the order. If the order is exempt from VAT, then the regular (tax-exclusive) pricing applies, and there is no hidden tax.

Note: A customer who has a regular or reseller tax exemption is also exempt from VAT: the customer pays the regular (tax-exclusive) price, and neither hidden tax nor regular tax is added to the order.

The system applies the VAT exemption only if:

• the customer has a VAT number defined, and the order is subject to VAT because:

- the Tax Included in Price (E70) system control value is selected, and

- the sold-to customer is located in a country that is different from the country for your company, as defined through the Work with Companies menu option (fast path = WCMP).

If a VAT exemption applies to the order, the setting of the Tax code field changes to Exempt, and the words VAT EXEMPT default into the Rsl/ex# field for the order. In this case, you cannot override the tax status of the order to make it taxable.

Note: You cannot set up a VAT exemption at the state level. VAT exemption information is at the customer level only.

Third Level: State Exemptions

You use the Customer Tax table, available by selecting Customer Tax in customer maintenance, to set up exemption or reseller records at the state or province level. State-specific information you have set up through the Work with Customer Tax Screen defaults in order entry only if:

• there is no applicable Tax exempt code and Exempt certificate set up at the customer level, or you have cleared the fields in order entry, and

• no Exempt expiry (Tax exempt certificate expiration date) is specified at the customer level, or the date specified is in the future, and

• no Expiration date date is specified for the state of the shipping address; or the date specified is in the future, and

• a VAT exemption has not defaulted on the order, and

• the state-level record includes exemption (E) or reseller (R) information. No other type of state-level tax information defaults in order entry.

If you have tax information set up in the Customer Tax table, you need to clear the tax fields in order entry whenever you make any changes to the order that might affect its taxability.

Example: A customer has a reseller exemption in Massachusetts but not in Rhode Island, and the sold-to address is in Massachusetts. When you first advance to the order header screen in order entry, the Massachusetts certificate number defaults. To override the customer's default tax status, clear the Tax code and Rsl/ex# fields, and then enter the Rhode Island shipping address. In the case of a one-time ship-to address, you need to enter the ship-to address and then clear the related fields. This step enables the system to default the tax information, if any, for the Rhode Island address, and prevents the Massachusetts information from applying incorrectly.

Work with Customer Tax Screen

Purpose: Use this screen to create, change, delete, or display tax exemption information for a customer that is specific to a state or province. See Working with Customer Tax Status for a discussion.

How to display this screen: From any Work with Customer screen, select Customer Tax for a customer (see Selecting Customers). You can also advance to this screen by selecting Customer Tax at a Create, Change, or Display Customer screen (see Creating and Updating Sold-to Customers (WCST)).

Field	Description
Customer	A unique number assigned to each customer who places an order, and the customer's name or company name. Customer number: numeric, 9 positions; display-only, assigned by the system. Customer last name: alphanumeric, 25 positions; display-only. Customer first name: alphanumeric, 15 positions; display-only. Customer middle initial: alphanumeric, 1 position; display-only. Customer company name: alphanumeric, 30 positions; display-only.
Cty (Country)	The country where the customer has a reseller or other tax exemption. Country codes are defined in and validated against the Country table; see Setting Up the Country Table (WCTY). Alphanumeric, 3 positions; optional.
State	The state or province where the customer has a reseller or other tax exemption. State codes are defined in and validated against the State table, which is accessible through the Work with Countries menu option; see Setting Up the Country Table (WCTY). Alphanumeric, 2 positions; optional.
Tax (Tax code)	The tax status of the customer in the state shown. Enter a valid tax code to display tax records that match your entry. Valid values are: • Exempt = The customer is exempt from paying any taxes, including VAT, in this state or province. • GST Only = Not currently implemented at the state or province level. To flag a customer as eligible for Goods and Services tax only, use the Tax exempt setting at the customer level. • Non-Tax = Not currently implemented. • PST Only = Not currently implemented at the state or province level. To flag a customer as eligible for Provincial Sales Tax only, use the Tax exempt setting at the customer level. • Resale = The customer is a reseller and exempt from paying any taxes, including VAT, in this state or province. • Standard = The customer is subject to tax. Although you can create tax records using any of the codes above, retrieving tax status for any tax code but Resale or Exempt is not currently implemented. Optional.
Resale/exempt #	A number that the state issues to identify a customer who is not subject to taxes on purchases. This number applies only if there is no Exempt certificate set up at the customer level. Alphanumeric, 15 positions; optional.
Expiration date	The date the customer's exempt or reseller certificate expires in this state. This expiration date applies only if there is not an Exempt expiry (Tax exempt certificate expiration date) specified at the customer level. Numeric, 6 positions (in user date format); optional.

Screen Option	Procedure
Create customer tax status	Select Create to advance to the Create Customer Tax Screen.
Change customer tax status	Select Change for a tax record to advance to the Change Customer Tax screen. At this screen, you can change the tax code or the resale/exempt number. See Create Customer Tax Screen for field descriptions.

Create Customer Tax Screen

To create: At the Work with Customer Tax Screen, Select Create to create a tax record for a state or province.

Note: You should set up Customer Tax records for exemptions or reseller certificates at the state level only if the customer does not have an exemption or reseller certificate at the customer level. See Customer Tax Overview for a discussion.

Field	Description
Customer	A unique number assigned to each customer who places an order, and the customer's name or company name. Customer number: numeric, 9 positions; display-only, assigned by the system. Customer last name: alphanumeric, 25 positions; display-only. Customer first name: alphanumeric, 15 positions; display-only. Customer middle initial: alphanumeric, 1 position; display-only. Customer company name: alphanumeric, 30 positions; display-only.
Country	The country where the customer has a special tax status. Country codes are defined in and validated against the Country table; see Setting Up the Country Table (WCTY). Alphanumeric, 3 positions, Create screen: required. Change screen: display-only.
State	The state or province where the customer has a special tax status. State codes are defined in and validated against the State table, accessible through the Work with Countries menu option; see Setting Up the Country Table (WCTY). Alphanumeric, 2 positions. Create screen: required. Change screen: display-only.
Tax (Tax code)	The tax status of the customer in the state shown. The tax status of the customer in the state shown. Enter a valid tax code to display tax records that match your entry. Valid values are: • Exempt = The customer is exempt from paying any taxes, including VAT, in this state or province. • GST Only = Not currently implemented at the state or province level. To flag a customer as eligible for Goods and Services tax only, use the Tax exempt setting at the customer level. • Non-Tax = Not currently implemented. • PST Only = Not currently implemented at the state or province level. To flag a customer as eligible for Provincial Sales Tax only, use the Tax exempt setting at the customer level. • Resale = The customer is a reseller and exempt from paying any taxes, including VAT, in this state or province. • Standard = The customer is subject to tax. Although you can create tax records using any of the codes above, retrieving tax status for any tax code but Resale or Exempt is not currently implemented. If you enter a tax code of Resale or Exempt, a Resale/Exempt number is also required. Alphanumeric, 1 position; required.
Resale/exempt #	A number, issued by the state, that identifies the customer as exempt from taxes on purchases. Alphanumeric, 15 positions; required if the Tax code is Resale or Exempt.
Expiration date	The date the customer's exempt or reseller certificate expires in this state. This expiration date applies only if there is not an Exempt expiry (Tax exempt certificate expiration date) specified at the customer level. Numeric, 6 positions (in user date format); optional.