Term Discounts in SuiteTax
Learn how SuiteTax manages term discounts, and the associated tax adjustments for sales and purchase transactions. You can configure preferences, learn how the system calculates discounts, and how adjustment transactions are handled.
A term discount provides a reduction on an invoice when payment is made within a specified term. For example, you can deduct 2% from the amount due if the payment is made within 10 days. Otherwise, the full amount is due.
SuiteTax can automatically manage both the discount and the related tax adjustment when payments are made within the discount period. This reduces manual work and helps ensure tax compliance.
If you want to customize any role for recording payment with term discounts, ensure that the role has edit-level access to the Tax Details tab and the permission to create adjustment transactions.
Prerequisites
To generate adjustment transaction for the term discount amount at the time of payment, enable the Create Adjustment Transactions for Term Discounts accounting preference for other items or transactions.
To enable the Create Adjustment Transactions for Term Discounts accounting preference:
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Go to Setup > Accounting > Accounting Preferences.
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Click the Items/Transactions subtab.
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Scroll down to the Other Transaction Preferences section.
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Check the Create Adjustment Transactions for Term Discounts box.
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Click Save.
To adjust tax amount along with term discount amount, enable the Include Tax When Calculating Term Discount preference at the nexus level.
Term Discounts on Transactions
When you enable the Create Adjustment Transactions for Term Discounts accounting preference, the system creates an Other Charge item called the "Term Discount" item in the background.
Example
Your invoice has a subtotal of $1,000 and tax of $50, and the term discount is 10%. If the nexus preference is enabled, the discount is 10% of $1,050 ($105). If the preference is not enabled, the discount is 10% of $1,000 ($100).
Adjustment Transactions for Term Discounts
When a payment qualifies for a term discount and the Include Tax When Calculating Term Discount preference is enabled, SuiteTax automatically creates an adjustment transaction for the discount and the associated tax. For sales transactions, the system creates a credit memo for an invoice. For purchase transactions, the system creates a bill credit for a vendor bill.
Adjustment transactions are system-generated and connected to the original transaction and payment. They can't be edited or deleted manually to help maintain accurate transaction records.
Example
You have an invoice or vendor bill for $1,000 and tax of $50 with a 10% term discount. If the Include Tax When Calculating Term Discount preference is enabled and you pay within the discount period, the system calculates a $105 discount. Your due payment is $945. SuiteTax then automatically creates an adjustment transaction that is linked to the original transaction and payment. Depending on the transaction type, the adjustment transaction is either a credit memo for sales transactions or a bill credit for purchase transactions.
Item Record Used in Term Discount Adjustment Transactions
SuiteTax uses a system-generated Other Charge item type called "Term Discount" when posting adjustment transactions.
The term discount item must remain active. If you delete it or make it inactive, adjustment transactions won't be created. If you do delete the item, you should first disable the accounting preference and then enable it again. The term discount item will be created again.
When enabling the term discounts feature, make sure you select the Default Expense Account and Default Income account so that the term discount item is created correctly.
If you change default accounts at the accounting preferences level, existing transactions and the term discount item aren't updated automatically. You should update the item's account manually as needed.
If the term discount item wasn't created, you'll need to go to the accounting preference and first disable it and then enable it again.