SM-E  Enter Tax Codes

Purpose of Program

Use this program to create tax codes for each tax authority to which sales tax is owed on sales and (optionally) on purchases.

Once each tax authority is set up with a tax code, tax codes are then grouped together in SM-F  Enter Tax Groups and thus can handle tax processing on invoices and purchase orders where multiple tax authorities (state, local, etc.) are involved.  Taxable customers and vendors are assigned to the tax groups that are created through SM-F.

All of these taxes due can be listed via AR-K  Print Sales Tax Report and can be transferred to payment via AR-L  Transfer Sales Taxes.

Sales tax processing

Sales tax processing in the United States is straightforward and usually involves a single sales tax rate applied to selective line items with a single tax total at the bottom of the invoice.  Sometimes, however, multiple tax authorities are involved, such as state and local tax authorities.

In other countries multiple taxes (such as federal taxes, provincial taxes, local taxes, value added taxes, excise taxes) often apply and sometimes must be itemized on the invoice.  In some cases, taxes are applied in a hierarchical fashion in which some taxes are axes on taxes.

The system allows you to set up tax codes for each type of tax via this program and then allows you to group these taxes together via SM-F  Enter Tax Groups.  Any number of these tax groupings can be set up and assigned to particular customers and vendors.  You can specify whether freight is to be taxed, whether a tax applies to other taxes, and whether the tax is to be itemized and printed out on the invoice.

Purchase tax processing

In the United States the collection and reporting of tax on purchases is the responsibility of the vendor, in which case no reporting and processing of taxes on purchases is required.  If this is the case, set the Track PO taxes using tax groups? prompt to N in SD-C  Purchase Orders Defaults.

In some other countries, however, this is not the case and the tax must be accounted for and reported in the same fashion as sales tax.  The same type of tax codes and tax groups used for sales taxes can also be set up in SM-E and SM-F for taxes on purchases.

Field Explanations

Tax Code

This is the code that identifies the tax code and is used in SM-F  Enter Tax Groups to create tax groups.

Description

The tax code’s description.

Tax Identification Number

This is optional and usually would be for a governmental identification number.  This number prints on sales and purchase order documents, if specified so in SM-F  Enter Tax Groups.

Vendor Code

This is a valid vendor code the system will use to transfer the accumulated tax amount when processed via AR-L  Transfer Sales Taxes.

Percent %

The tax percentage used in calculating the amount of tax.  The tax is based on the sales/purchase order line amount.

GL-Account

The General Ledger account to which the taxes will be posted.  If left blank, the taxes will post to the account defined in AD-A  General Ledger Defaults .

General Program Operation

Enter the appropriate information for each tax authority.  This information will be used by SM-F, Enter Tax Groups, to determine the appropriate tax processing for each tax code within each tax group.

If you want to process taxes on purchase order transactions, you must set the Track PO taxes using tax groups? prompt to Y in SD-C  Purchase Orders Defaults.