VAT and SUT on Services

VAT is a governmental consumer sales tax, a straight percentage that is added to the cost of a good or service. At each step in the supply chain, VAT is calculated by multiplying the cost of the good or service by the tax rate, charged by the seller to the buyer. While at each step in the supply chain except the last, the buyer can normally recover the VAT incurred. Thus, the liability for VAT is essentially the value added at each step in the supply chain.

SUT is a governmental retail sales tax, a straight percentage that is added to the cost of a good or service. Normally, everyone but the final consumer is exempt from this tax. Sales tax is charged, collected, and remitted to the government by the retailer, while use tax is not handled by the retailer, but still due to the government, and must therefore be self-assessed and remitted by the purchaser.

The major difference between VAT and SUT is that almost everyone pays VAT and recovers the VAT they paid except the end consumer, whereas only the end consumer pays SUT. Everyone in the middle of the supply chain is exempt from SUT.

The PeopleSoft tax tables require you to define:

• Tax authorities, which contain individual tax rates and accounting information used to post the tax liability to a general ledger.

• Tax codes, which consist of a group of tax authorities.

The system calculates VAT and SUT when you create a work order. This enables you to estimate VAT and SUT charges at an earlier stage in the supply chain, so that you have a more accurate understanding of the final amount. The system triggers SUT and VAT defaulting and calculations when you save the work order. If PeopleSoft Services Procurement is integrated with PeopleSoft Purchasing, the system copies VAT and SUT codes and percentages as a default from PeopleSoft Purchasing purchase order to the PeopleSoft Services Procurement work order upon work order release.