Understanding Tax Information for Purchase Orders and Sales Orders

In most business environments, you are required to pay taxes on the items that you purchase or sell. When you enter a purchase or sales order that has taxes, you must enter a tax rate area and tax explanation code on the order or use default tax information that you set up for the supplier or customer.

During order entry, the system retrieves the tax explanation code and tax rate areas from the customer or supplier record. For direct ship, transfer orders, or sales orders with alternate sold-to and ship-to addresses, the system retrieves the tax explanation code from the sold-to address and the tax rate/area from the ship-to address.

If you enter purchase or sales orders using a header form, which is specified by a processing option, the tax information that you enter applies to all the items that you enter on the detail form. You can override this tax information on the individual order to accommodate each item or service.

You can also enter tax information in the detail area of the Voucher Match form when you match the purchase order to the receipt to create the voucher.

Note: The system creates different journal entries when you enter the tax during the voucher match process than it does when you enter the tax information during purchase order entry.

See Understanding Tax Explanation Codes.

Taxes are applicable for the item or service only if you specify the detail line as taxable. You specify items as taxable for sales or purchasing in the Item Branch/Plant program (P41026), but you can override the Tax (Y/N) field on the detail line.

The system does not store tax amounts on orders; the system stores tax amounts on the voucher or invoice record that the system creates from the order.

Note: The system uses the Invoice date (IVD) for tax calculations. For all processing prior to the prining of the invoice, the system uses the Transaction Date (TRDJ).