Understanding Tracking Taxes by Tax Rate/Area
When you enter invoices and vouchers with taxes, the system calculates amounts according to the information that you enter:
If you enter the gross amount, the system calculates the taxable and tax amounts.
If you enter the taxable amount, the system calculates the gross and tax amounts.
If you enter both taxable and gross amounts, the system calculates the tax amount based on the taxable amount. If the taxable and tax amounts do not sum to the gross amount that you entered, the system updates the difference in the Nontaxable Amount (ATXN) field.
Note: Only the system updates the Nontaxable Amount field. You cannot enter a value into the field using the transaction entry programs.
When you enter a taxes-only transaction, complete the Tax field for the total amount of the transaction.
If you use the track taxes by tax rate/area, the system will track taxes by general ledger account under the following circumstances:
The pay item of a voucher (F0411) or invoice (F03B11) contains a tax explanation code and tax rate/area.
Use tax explanation codes to specify the amount to distribute in the general ledger. Use the tax explanation codes ST,VT, and CT for invoices; use tax explanation codes ST,UT,VT,BT, and CT for vouchers. When you use tax explanation codes ST or CT, you must distribute amounts to the GL accounts. If you enter a tax-only transaction for sales tax (ST), the amount to distribute is the tax amount only. If you enter a tax-only transaction for Canadian sales tax (CT), the amount to distribute is the sales tax (PST) amount only.
When you have multiple pay items with different tax rate/areas and tax explanation codes, determining the amount to distribute can be challenging. In addition to providing you with the total amount to distribute, the system provides a Tax Amounts to Distribute window that you can access from a Form menu, which displays the tax amount to distribute based on the tax explanation code and tax rate/area. Amounts are based on the mode of the transaction, therefore, if you enter the transaction in a foreign currency, the system displays the tax amounts to distribute in the foreign currency.
The GL distribution account is set up to track taxes.
When you enter an invoice or voucher, you can also track taxes by general ledger account if the account is set up as taxable. The system does not update accounts with tax information until transactions are posted to the F0018 table and then updated to the F0018R table.
The Track Taxes field on the GL Distribution form has a value of 1 for vouchers and invoices that you enter manually.
For manual entries, the system uses these rules to determine whether to update the specific tax information to the Account Ledger table (F0911):
If tax information does not exist on the F0411 or F03B11 table, and you add tax information to the general ledger account, the system removes the tax information from the record when you click OK
If the general ledger account is taxable, and you do not complete the Tax Rate Area field on the GL Distribution form, the system uses the default tax rate/area that is set up on the F0901 table. You must enter a tax explanation code.
If the general ledger account is taxable, but you do not want to track taxes for the transaction, you can override the Track Taxes field to 0.
After the system updates the F0911 table with tax information, you must post the transactions to update the F0018 table.
When you track taxes by tax rate/area, there is no direct relationship between the taxable pay items and individual G/L distribution lines. After you post transactions, run the Tax Reconciliation Repository program (R0018R) to allocate tax amounts from the F0911 table to the Tax Reconciliation Repository table (F0018R) by pay item. The results of this process are approximate because the system relies on an allocation.
See Understanding Tracking Taxes.