Configure sales tax settlement periods
Sales tax settlement periods specify the intervals when the company reports and pays taxes. The company can then determine which sales tax settlement period to report to the authorities. Finance automatically selects the posted tax transaction with the settlement period when it reports the transaction.
Watch this video to learn how to set up the sales tax settlement periods:
Every sales tax code must be linked to a sales tax settlement period. Every sales tax settlement period must be assigned to a sales tax authority. A sales tax authority represents the entity that sales tax is reported and paid to. It also defines the layout for the sales tax report. Sales tax authorities can be related to vendor accounts.
Every sales tax code must also be linked to a ledger posting group, which specifies the main accounts that amounts for the sales tax codes will be posted to.
All tax codes associated with the settlement period will be settled. Depending on the related sales tax authority setup, the tax liability is posted either to a vendor or a general ledger account.
You can run a settlement process for a settlement period for a specific date interval.
If the Period interval unit is set to Month(s) and the Period interval duration is set to 1, a new period is automatically one month. However, if the Period interval unit is set to Month(s) and the Period interval duration is set to 12, the length of one period is one year, or 12 months. You can create new periods automatically by selecting New period interval.
The related sales tax authority can be set up as a vendor and the sales tax settlement will create an open vendor invoice. The terms of payment define the due date for the open vendor invoice.
The sum of period intervals must cover whole periods so that no tax transactions fall outside the calculation periods. Period intervals cannot overlap.
Reporting periods depend on the size of the company, laws, and the authorities. Typical periods could be:
- Monthly
- Quarterly
- Yearly
By default, Finance generates offset tax transactions during the settlement process, which can cause performance issues if there are many tax transactions within a period interval. Enable the Prevent generating offset tax transactions option to prevent generating offset tax transactions.
