Tax Inclusive Pricing for SuiteTax Engine
Use the Tax Inclusive Pricing feature with the SuiteTax Engine (STE) to calculate tax when transaction prices already include tax. The STE supports tax-inclusive pricing for VAT-based sales and purchase transactions.
To enable this feature, see Tax Inclusive Pricing in SuiteTax for instructions.
When Prices Include Tax is checked, NetSuite sends gross transaction amounts to the STE. The STE determines the applicable tax codes and separates each gross amount into its net amount and tax amount. When the box isn't checked, the STE continues to calculate tax from tax-exclusive net amounts.
Benefits of the SuiteTax Engine Support for Tax Inclusive Pricing
When you use Tax Inclusive Pricing with the STE, you can:
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Calculate VAT from prices that already include tax.
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Use tax-inclusive pricing on supported sales and purchase transactions.
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Calculate tax for individual tax codes and tax groups containing multiple tax codes.
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Apply discounts according to whether tax is calculated before or after the discount.
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Use existing tax-rounding preferences and rounding groups.
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Retain the selected pricing mode during supported transaction processing.
The STE is responsible for calculating the tax lines shown on the Tax Details subtab. SuiteTax Core uses the information returned by the STE to populate the transaction item lines and summary amounts.
Calculating from Tax Exclusive Prices and Tax Inclusive Prices
The Prices Include Tax setting determines how the SuiteTax Engine (STE) interprets transaction prices for both sales and purchases.
When Prices Include Tax isn't checked, the transaction uses tax-exclusive pricing (TEP). NetSuite provides the net amount to the STE, and the engine determines the applicable tax code and calculates tax on the net amount.
For example, if the net amount is 100 and the tax rate is 20%, the STE calculates tax of 20, resulting in a gross amount of 120.
When Prices Include Tax is checked, the transaction uses tax-inclusive pricing (TIP). NetSuite provides the gross amount, including tax, to the STE. The engine determines the applicable tax code or tax group and separates the gross amount into the net amount, or tax basis, and the tax amount included in the gross price.
The method used to derive the tax basis depends on the applicable tax type. For a basic tax type, and also for the tax types with the Post To Item Cost and Reverse Charge for sales properties, the calculation can be represented as:
Tax basis = Gross amount รท (1 + tax rate)
For example, if the gross amount is 120 and the applicable regular tax rate is 20%, the tax basis is 100 and the tax amount is then 20.
Some tax types with special properties are treated differently when the STE calculates tax. For tax types with the Does not Add to Transaction Total (withholding tax) property, such as withholding tax, and the Tax Included in Net Amount (TINA) property, the net amount always equals the gross amount in both TEP and TIP. Therefore, the STE derives the tax basis directly from the gross amount and applies the applicable tax rate to that tax basis.
For purchases, tax types with the Reverse Charge property are treated in the same way as tax types with the Does not Add to Transaction Total or Tax Included in Net Amount properties. When a reverse charge tax code is applied on its own to an item line, the net amount equals the gross amount in both TEP and TIP. The STE therefore derives the tax basis directly from the gross amount and applies the applicable tax rate to that tax basis.
When a tax group with multiple tax codes applies, the STE derives the tax basis by summing the rates from all tax lines for the item that use basic tax types, meaning tax types without special properties. This can also apply to the Post To Item Cost (PTIC) or Reverse Charge for Sales (RCS) tax types. The STE then calculates the tax amount for each applicable tax detail line.
Tax-inclusive pricing may not be appropriate for purchase lines subject to reverse charge because the supplier price normally doesn't include the reverse-charge tax. NetSuite warns you when a tax-inclusive transaction contains one or more lines subject to reverse charge. If you continue, the STE calculates the applicable taxes according to the tax-inclusive calculation rules.
Reverse charge combined with Post To Item Cost isn't supported for purchases using tax-inclusive pricing.
Viewing Tax-Inclusive Calculations
On the Tax Details subtab, each applicable tax code or tax group produces the corresponding tax detail lines.
For tax-inclusive transactions:
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Tax Basis shows the gross amount less the taxes included in that amount.
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Tax Amount shows the calculated tax for the tax detail line.
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Tax amounts are rounded according to the applicable tax-rounding preferences.
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When a tax group applies, more than one tax detail line can be created for an item line.
The tax basis displayed on the Tax Details subtab can differ slightly from the unrounded tax basis used internally for calculation because the displayed value reflects the rounded tax amounts.
Discounts, Shipping, and Handling
Discounts, shipping, and handling follow the transaction pricing mode.
Discount, shipping, and handling items don't have separate TIP and TEP prices. NetSuite determines if their amounts are treated as net or gross based on the Prices Include Tax setting on the transaction.
In TEP mode, the applicable rate or amount is treated as a net amount, excluding tax. In TIP mode, the applicable rate or amount is treated as a gross amount, including tax.
Known Limitations of the Tax Inclusive Pricing Feature with the SuiteTax Engine
Consider the following limitations when using Tax Inclusive Pricing with the STE:
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Tax-inclusive calculation for United States nexuses isn't supported.
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Reverse charge combined with Post To Item Cost isn't supported for purchase transactions using tax-inclusive pricing.
For the full list of the Known Limitations of the TIP with SuiteTax, see Tax Inclusive Pricing in SuiteTax.