Create sales tax codes
Sales tax codes
You create sales tax codes when you initially set up Finance. Update the sales tax codes when you need to make changes to existing taxes or when you add new taxes. Because taxes frequently depend on geographic location, changes to the company's market can result in the need for new sales tax codes.
Watch this video to learn how to set up the sales tax codes:
The Sales tax code is a central part of the setup of taxes in Finance. Sales tax codes specify the following:
- How taxes are calculated
- The value that is used for tax calculation
The sales tax value is important because no tax is calculated without it. A sales tax code includes information about:
- How the tax is calculated, posted, and reported
- When the payments are made
- To whom the payments are made
You can define the sales tax rate for the following:
- Various intervals and periods in Values
- Limits on sales tax amounts in Limits
On the Calculation FastTab, in the Origin field, if Amount per unit is selected, the value will be multiplied by the quantity on the transaction to calculate the sales tax amount. If the tax code is not a unit-based tax, the value is a percentage that is applied on the Origin for this tax code to calculate the sales tax amount
Select from the following options in the Origin list:
- Percentage of net amount - Percentage of purchase or sale, excluding any other taxes.
- Percentage of gross amount - Percentage of purchase or sale, including any other taxes. Sales tax calculates as a percentage of the purchase or sale amount. This includes all other taxes or duties.
- Percentage of sales tax - Percentage of another tax. The tax code that this calculation is based on must exist in the system. On the Calculation tab, set up the specific sales tax code that you based the current sales tax code on, in the Sales tax on sales tax field.
- Amount per unit - Indicate the unit on which the sales tax will be calculated in the Unit field. If the transaction is in another unit, it converts automatically based on Unit conversion in Inventory.
- Calculated percentage of the net amount – The calculated percentage of net amount calculation method can be used to calculate input tax deduction for per diem expenses (as used, for example, in Germany).
Tax calculation enables the global tax engine to automate and simplify the tax determination and calculation process. To set up Tax calculation in Finance, go to Tax > Setup > Tax configuration > Tax calculation parameters.
You can also use the Tax calculation data model to automate and standardize tax determinations and calculations. It includes the header fields and line fields of transaction documents in Finance.
Sales tax code intervals - values and limits
Values define the tax to calculate, on either a percentage or amount per unit, based upon the effective interval dates and the minimum and upper limits. These limits refer to the minimum and upper sales amounts to which the amount entered in the Value field applies.
Limits define the tax to calculate, based upon the effective interval dates and the minimum and maximum sales tax. These limits are the minimum and maximum sales tax that will be calculated on the sale, after all tax calculations are performed.