Setting Up Default Tax Codes

Customer and Vendor Tax Codes by Location

Use the Address Tax Code Defaults form to enter default tax codes by location (country, state, and zip) for new customer and vendor records. You can enter tax codes all at once or as needed to do business with customers and vendors in different locations.

When a new customer ship-to record or vendor record is created in SyteLine, or when a new customer ship-to record is created from the Customer Portal, a tax code from this form which is associated with the new shipping or vendor address is used as the default tax code on the customer ship-to or vendor record. If no matching tax code is found here, the standard SyteLine tax code default, from the Tax Systems form, is used.

Matching Addresses for Tax Codes

The matching process for the default tax code uses the values from the Address Tax Code Defaults form as described here:

• If a default tax code exists on this form where the country, state, and zip code all match the address, use that tax code.
• Otherwise, if a default code with a matching country and state, and a blank zip code exists, use it.
• Otherwise, if a default code with a matching country and zip,  and a blank state exists, use it.
• Otherwise, if a default code with  a matching country, and a blank state and zip exists, use it

For example, you can specify a default tax code with a country and state, and leave the zip code blank, to use that code as the default for all addresses in that state.  Or, if you ship orders to a country for which you don't charge taxes, you can set up a default tax code for that country as Exempt, and not fill in a state or zip.

Tax Codes and the Customer Portal

For new Customer Ship-To records added in SyteLine, the SyteLine user can change the default tax code to an appropriate code. But for new customer records added from the portal, there is no human intervention, so having an appropriate default tax code is more important.

During Customer Portal setup, it is helpful to set up as many default tax codes as possible in the Address Tax Code Defaults form. At least one address tax code for each country to which a sale or purchase can occur should be created at each site in the Customer Portal site group.  If the Address Tax Code Defaults form has no records, then when customers add orders through the portal, the portal cannot display valid tax amounts for their area. In that case, customers submit the order without knowing how much they will pay in taxes on the order. To ensure that new customer records created from the portal have the correct tax codes, an alert is sent to subscribed SyteLine users when someone registers on the portal, and again if someone creates a ship-to address but no address tax code default can be found for their address. The customer and order are then put on Ship Hold until an SyteLine user can enter a valid tax code for the customer and order.

We recommend that, to start with, you create at least one tax code for each country. Over time, as you create more matching tax code records, the Address Tax Code Defaults form becomes more useful. Customer addresses can be more precisely matched to the default tax codes, and more new customers and orders can flow through the system automatically without waiting for manual entry of a valid tax code.

For more information, refer to the portals administration guide.

Tax Codes, Portals and the Tax Interface

If you use the Tax Interface module for taxing of Customer Portal orders, you can specify the EXTRNL tax code as the Tax System 1 default tax code in the Address Tax Code Defaults form. Then any new Customer Ship-To record created from the portal uses the default tax code of EXTRNL when there is an address match. A tax code of EXTRNL triggers the customer order tax calculation logic to calculate tax amounts using the Tax Interface module logic instead of the standard SyteLine tax calculation logic.

For vendor records, a default tax code of EXTRNL is invalid and must be manually changed to a valid tax code.

General Process for Determining Default Tax Codes

The system uses the process below to determine the default tax code when you provide an address in a new Customer Ship-To or Vendor record. This process is used in  both area-based and item-based tax systems.

In an area-based tax system, the customer/vendor tax code is required. When a new customer or vendor record is added, the default tax code on the Customer Ship-Tos or Vendors form is set as described above. You can change the default value.  The value from the Customer Ship-Tos or Vendors form then defaults into the customer order or purchase order header, respectively. This tax code is passed on to the invoice or voucher records and to the tax records. In an area-based tax system, the tax code for an item on the Items form is either blank or set to an exempt tax code.

In an item-based tax system, the item tax code is required on the Items form. When a new item is entered on the Items form, the item tax code is set to the default Item tax code from the Tax Systems form. You can change that default value. The tax code on the Items form then defaults into the customer order or purchase order line/releases. This tax code is passed on to the invoice or voucher records and to the tax records. In an item-based tax system, the customer or vendor tax code is either blank or set to an exempt tax code.

For either area- or item-based tax systems, whenever a new line item is added to a CO or PO, the new line item's tax code is set to the tax code in the Items form, except in the case where a special - for example, non-zero tax rate - exempt code is entered on the CO or PO header. Exempt tax codes are defined as follows:

• Exempt with zero rate: In either area-based or item-based tax systems, the line item is not taxable.
• Exempt with non-zero rate: In area-based tax systems, tax is based on the rate of the tax code in the header. In an item-based tax system, use the tax jurisdiction, which is a special setup. If a tax jurisdiction is not specified, then tax this line based on the rate of the tax code for the line item.

If the line item's tax code is blank, the tax code from the CO or PO header is used to calculate taxes on the line items.

Freight and miscellaneous tax codes on the CO or PO are set to the tax code specified in the Freight Tax Code and Misc. Tax Code on the Tax Systems form.

For accounts receivable and accounts payable transactions, the default value of the tax code is set  from the specified customer ship-to or vendor. However, the freight and miscellaneous tax codes are pulled from the AR/AP Tax Code fields on the Tax Systems form.