Setting Up Tax Rate Types for the United States

Tax rate types are automatically provisioned by the SuiteTax Engine. For tax codes created outside of automatic provisioning, the tax rate type must be set during tax code creation.

For more information on SuiteTax Engine tax records automated provisioning, see Automatic Tax Records Provisioning for the United States.

To set the tax rate type while creating a tax code:

1. Go to Setup > Tax > Tax Codes > New.

2. In the Name field, enter a name.

3. In the Description field, enter a description.

4. In the Tax Type field, select a tax type. You can create a new tax type at Setup > Tax > Tax Types > New.

5. In the Payables Account and Receivables Account fields, the accounts reflect the account that is defined in the selected tax type.

6. In the Available On field, select a type of transaction.

7. In the Tax Rate Type field, select a tax rate type.

8. Click Save.

Tiered Tax Rates

The SuiteTax Engine supports tiered rate tax codes for the United States. The parameters of tiered rate tax codes are as follows:

• Threshold basis – the amount the SuiteTax Engine is using at for the determination of the correct tier. The amount is based on:

  • Single Item – price of a single item on the transaction line

  • Invoice Total – total receipt amount per invoice (before taxes)

• Threshold type – the method the SuiteTax Engine is using for tax calculation where a tiered rate applies:

  • Spread method – based on the amount (either single item or invoice total), SuiteTax Engine determines the correct tier, then the corresponding rate for the tier is applied to the whole line. For example, if you create a sales invoice for one item with a price of $300,000, the whole amount is taxed at 21% rate based on the parameters shown below.

  • Split method – successive tiers are applied to the marginal price. For example, if the company is invoicing the sale of one item with a price of $300,000, the amount up to $500 is taxed at 0% rate, the next $199,500 is taxed at 15% and last $100,000 is taxed at 21% rate, based on the parameters shown below.

    Note:

    If more tiered tax code rates are applied (which is usually the case if the threshold type equals to the Split method), we apply the average rate of all the tiered tax rates. You can see the average rate in the Tax rate column on the Tax Details subtab on the transaction. Please note that even a non-taxable, or 0%, tier also counts as a rate. For example, if the taxable amount is USD 10,000, and the first USD 5,000 is taxed by 10%, and the amount above USD 5,000 is non-taxable, the average rate applied is 5%. For better understanding, there is a note “Tiered tax code is applied” in the Details column on the Tax Details subtab on the transaction.

General Notices