Specify Tax OptionsSpecify Tax OptionsYou use the Tax Options dialog box in the Organizations (SP) application to specify default tax GL accounts and to define tax codes for the system to use in calculating the amount of tax that is due on a PR, RFQ, PO, or invoice. You can define up to five different tax types, each of which can have any number of tax codes. The system uses tax type and tax code as follows:
A tax type corresponds to a kind of tax, for example, to a federal, state, or city sales tax. Another tax type might be a special tax for handling hazardous material.
A tax code represents a particular tax rate, such as MA for the Massachusetts sales tax of 5%. Thus, one tax type might include tax codes for all state or provincial sales taxes.
How you specify the tax options will depend on the requirements of your financial system.
The system adds the tax to the line cost for the item; the total for the line appears in the Loaded Cost column on the PR Lines tab, PO Lines tab, and Invoice Lines tab.
Tax Options are set at the organization level.
In the Organizations (SP) application, select the organization for which you want to specify tax options.
From the Select Action menu, select Purchasing Options, then select Tax Options. The Tax Options dialog box opens. It has five tabs with which you can define up to five tax types, and opens to Tax Type 1.
In the Tax Type 1 Description field, enter a description for Tax Type 1. For example, State and provincial sales taxes.
In the Paid Tax GL Account field, enter the appropriate GL account if your financial system uses one. This general account is for taxes paid to the vendor and is only used in the Invoice application.
In the Unpaid Tax GL Account field, enter the appropriate GL account if your financial system uses one. This general account is for taxes not yet paid to the government and is only used in the Invoice application.
In the Add Tax 1 Amount To Vendor Price field, select one of the three options.
You can add the tax amount to the vendor price for one of the following choices:
For No Items (the default)
For Issue on Receipt Items Only (this adds the tax only to items purchased for issue on receipt)
For All Items.
Adding taxes to the cost of an item increases the stocked item average cost for that item. To avoid this increase, you can add the tax to issue on receipt items only. Then, items issued directly to a work order, general ledger (GL) account, location, or asset have the tax added to only the cost of the individual item.
In the Tax Options table window, click New Row. The Row Details open.
In the Tax Code and Description fields, enter a tax code and description. For example, MA and Massachusetts Sales Tax, respectively.
In the Tax Rate field, enter the percentage tax rate, for example, 5.00 (not .05) to specify 5%.
By default, the date in the Effective Date field is the current date. Enter a different one if appropriate.
Enter Paid and Unpaid Tax GL Accounts if appropriate. These accounts are specific to this tax code.
In the Changed Date field, enter the date and time you change the tax information (a new row defaults to the current date and time).
Click Close Details
.
Click the Tax Type 2 tab and enter a description for Tax Type 2. For example, city sales tax.
Fill in as appropriate the same fields as you did for Tax Type 1.
In the Calculate 2 Based on Price + section, select the Tax 1 check box if Tax 2 is a compound tax, that is, Tax 2 is determined by multiplying the Tax 2 rate by the sum of the item's cost plus Tax 1. Refer to Calculating Compound Taxes, below, for more information.
Repeat these procedures for Tax Types 3, 4, and 5 as required by your financial system. Note that each succeeding tax type includes all the previous tax types in the "Calculate Tax Based on Price +" section; you can include any or all of the preceding taxes in the tax calculation.
Click OK.
On each Tax Type tab except Type 1, a "Calculate Tax on Price +" group box allows you to include taxes from preceding tax types in the calculation. To designate that a tax is calculated on the price of goods including another tax, check the appropriate box. For example, on the Tax Type 3 tab, you can include taxes from Tax Types 1 and/or 2 in calculating the Type 3 tax.