Reporting Sales Tax in the US
When you first start using Business Central, you can run an assisted setup guide to quickly and easily set up sales tax information for your company, customers, and vendors. In a matter of minutes, you are ready to create sales documents and purchase documents with sales tax calculated correctly. Just search for the Set Up Sales Tax assisted setup guide, and then follow the steps in the guide. This includes specifying the accounts that you want to use for sales tax for sales and purchases.
We recommend that you choose to apply the new tax area to your own company information. If you also choose to apply it to customers or vendors, you'll be asked if you want to set a filter for which customers or vendors you want to apply the information to. For example, you can choose to apply the tax area to those customers that are in your own city or county, or to all customers.
Who you assign the tax area codes to will determine the taxes that are calculated on your sales and purchasing transactions.
If you move to the empty My Company, we recommend that you start by using each of the assisted setup guides, including the one for sales tax. If you prefer to set up sales tax yourself, this article explains what you have to take into consideration.
Tax Groups, Tax Areas, and Tax Jurisdictions
In Business Central, a tax group represents a group of inventory items or resources that are subject to identical tax terms. For example, you can set up a tax group for taxable items and another for nontaxable items. You must assign tax group codes to inventory items and general ledger accounts. Similarly, you must assign tax area codes to customers, locations, and to your own company settings. The assisted setup guide helps you do this.
Each tax area is a grouping of sales tax jurisdictions based on a particular geographic location. For example, the Miami, Florida, tax area includes three sales tax jurisdictions: city (Miami), county (Dade), and state (Florida). Business Central includes a limited set of tax areas with a default configuration, but you can change them and add new tax areas.
If you set up new tax areas and tax jurisdictions, you must make sure that you fill in the fields correctly. In the United States, states, counties, cities, and localities can charge sales tax. Companies collect and remit sales tax to these government authorities for products sold to end users. Sales tax can also be charged to existing sales tax. For example, tax can be calculated on a sales invoice amount that already includes the tax from other jurisdictions.
The Tax Details page shows different combinations of sales tax jurisdictions and sales tax groups to establish sales tax rates. For each tax jurisdiction, we recommend that you set up one tax group for normal sales tax, another tax group for items or services that are not taxed, and an additional tax group for every type of item or service that is handled with a different sales tax rate in that jurisdiction.
In the United States, when you sell to a customer at a location where you do not have a situs—or a legal location in that state—you do not collect sales tax. For locations in which you do not have a situs, ensure that both the Tax Below Minimum and Tax Above Maximum fields are 0.00.