Understanding PeopleSoft-Only Sales and Use Tax Processing

This section discusses:

  • Default logic for tax applicability and codes.

  • Sales and use tax calculations.

  • Calculation examples.

Tax applicability and tax codes are derived by ship to location, item, ultimate use code, and supplier. The value of the Tax Destination field is used to look up default values. The default values for tax applicability and tax codes are defined with ship to locations on the Ship To Locations page.

Default Logic for Tax Applicability and Codes

The following table describes the logic that the system uses to populate the tax applicability and tax codes onto the voucher line. You can override these default values at any time, and the system recalculates the values based on your new choices rather than the original defaults.

This defaulting logic is the only mechanism for defaulting tax applicability and tax codes.

When the system finds a match, it uses the matching row and exits the routine. If no match is found, the routine continues to the next step.

Condition Logic

If voucher line has an item, ultimate use code, and category:

  1. Looks for match in default table with the supplier ID and supplier location on the voucher header.

  2. Looks for match on supplier only.

If voucher line has an item and ultimate use code:

  1. Looks for match in default table with the supplier ID and supplier location on the voucher header.

  2. Looks for match on supplier only.

If voucher line has a category and ultimate use code:

  1. Looks for match in default table with the supplier ID and supplier location on the voucher header.

  2. Looks for match on supplier only.

If voucher line has an item and category:

  1. Looks for match in default table with the supplier ID and supplier location on the voucher header.

  2. Looks for match on the supplier only.

If voucher line has an item:

  1. Looks for match in default table with the supplier ID and supplier location on the voucher header.

  2. Looks for match on supplier only.

If voucher line has a category:

  1. Looks for match in default table with the supplier ID and supplier location on the voucher header.

  2. Looks for match on supplier only.

If voucher line has an ultimate use code:

  1. Looks for match in default table with the supplier ID and supplier location on the voucher header.

  2. Looks for match on supplier only.

Action:

  1. Match on supplier ID and supplier location on voucher header.

  2. Match on supplier ID on voucher header.

If voucher line has an item, ultimate use code, and category:

Looks for match in default table with no supplier and supplier location.

If voucher line has an item and ultimate use code:

Looks for match in default table with no supplier and supplier location.

If voucher line has a category and ultimate use code:

Looks for match in default table with no supplier and supplier location.

If voucher line has an item and category:

Looks for match in default table with no supplier and supplier location.

If voucher line has an item:

Looks for match in default table with no supplier and supplier location.

If voucher line has a category:

Looks for match in default table with no supplier and supplier location.

If voucher line has an ultimate use code:

Looks for match in default table with no supplier and supplier location.

Action:

  1. Match on all default rules for the ship to location.

  2. Set voucher line to exempt if no default row found.

Sales and Use Tax Calculations

The system calculates sales and use tax by applying the tax rate for the tax code on each voucher line against the taxable basis amount. After the system calculates all of the voucher lines, it compares the calculated sales tax amount against the amount of sales tax input on the Voucher Invoice Information page. When there is a difference between calculated sales tax and input sales tax, the system prorates the sales tax amount on the voucher across voucher lines that are sales tax applicable.

When the calculated sales tax amount is zero, the system prorates sales tax on the voucher by the percentage of each voucher line's basis amount, divided by the total sales tax basis amount of all voucher lines that have been designated as sales tax applicable. If a sales tax amount is calculated using the applicable tax rate, the sales tax input on the voucher is prorated by the percentage of the calculated sales tax for that line, divided by the total calculated sales tax amount for the voucher.

The system accrues the difference between calculated sales tax and the voucher sales tax amount as use tax if the Sales and Use Tax Edit Message field on the Payables Definition - Tax Options page is set to Warning and the sales tax tolerance levels are exceeded. The system processes accrued use tax entries in the same way as calculated use tax charges. No amount is accrued if the sales tax tolerance levels are not exceeded.

Calculation Examples

This section discusses:

  • Example 1

  • Example 2

The following examples are based upon certain assumptions.

Tax codes and rates include:

Tax Code Tax Rate

Sales1

2%

Sales2

4%

Sales3

6%

Sales4

8%

Use1

1%

Ship to A:

Appl Sales Tax Code Use Tax Code Ultimate Use Code Category Item Supplier Location

Taxable

Sales1

Use1

 

 

 

 

 

Direct Pay

Sales2

Sales2

MFG

 

 

 

 

Exempt

 

 

RSCH

 

ItemA

 

 

Taxable

Sales3

Sales3

 

 

 

SupplierA

Main

Exempt

 

 

RSL

 

 

 

 

Taxable

Sales4

Sales4

 

 

ItemA

SupplierA

Main

Ship to B:

Appl Sales Tax Code Use Tax Code Ultimate Use Code Category Item Supplier Location

Exonerated

 

 

 

 

 

 

 

Example 1

This example is based upon the following assumptions:

  • Accrue difference is not applicable.

  • Tolerance checking is not performed.

Vchr ID Total Entered Tax Supplier Loc Ship To Item Use Code Tax Code Calc Sales Tax Calc Use Tax

A

1000

10

SupplierB

Main

A

 

 

Sales1

20.00

0.00

B

1000

 

SupplierB

Main

A

 

MFG

Sales2

0.00

40.00*

C

1000

 

SupplierB

 

A

ItemA

RSCH

 

0.00

0.00

D

1000

10

SupplierA

Main

A

 

 

Sales3

60.00

0.00

E

1000

 

SupplierB

 

A

 

RSL

 

0.00

0.00

F

1000

10

SupplierA

 

A

ItemA

 

Sales4

80.00

0.00

G

1000

 

SupplierB

 

B

 

 

 

0.00

0.00**

* The direct pay certificate is copied onto the voucher. The sales tax rate is used and the use tax is calculated.

** The exoneration certificate is copied onto the voucher. No tax is calculated.

Note:

It is your organization's responsibility to provide the appropriate certificates when claiming an exemption. The system only displays a warning message if this field is left blank in the shipping information group box.

Example 2

This example is based upon the following assumptions:

  • Accrue difference is selected.

  • Tolerance checking is not performed or set to warning.

    If tolerance checking is not performed, the system accrues use tax charges whenever the sales tax calculated on the voucher is greater than the sales tax amount input by the user. If tolerance checking is set to warning and the sales tax tolerance levels are exceeded, the system accrues the difference as use tax charges.

Vchr ID Total Ent Tax Supplier Loc Ship To Item Use Code Tax Code Calc Sales Tax Calc Use Tax

A

1000

10

SupplierB

Main

A

N/A 

N/A 

Sales1

20.00

10.00

B

1000

N/A 

SupplierB

Main

A

N/A 

MFG

Sales2

0.00

40.00*

C

1000

N/A 

SupplierB

 

A

ItemA

RSCH

 

0.00

0.00

D

1000

10

SupplierA

Main

A

N/A 

N/A  

Sales3

60.00

50.00

E

1000

 

SupplierB

N/A 

A

N/A 

RSL

N/A 

0.00

0.00

F

1000

10

SupplierA

N/A 

A

ItemA

N/A 

Sales4

80.00

70.00

G

1000

N/A 

SupplierB

N/A 

B

N/A 

N/A 

N/A 

0.00

0.00**

* The direct pay certificate is copied onto the voucher. The sales tax rate is used and the use tax is calculated.

** The exoneration certificate is copied onto the voucher. No tax is calculated.

Note:

You must accept the calculated tax amount if tolerance checking is set to error.

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