Setting Up Tax Systems

Tax System

The system generates a 1 for the first tax system. If you are setting up a second tax system, the system generates a 2. Optionally, specify a description other than "Tax System". Once the tax systems are created, the first tax system cannot be deleted.

Tax Mode

Select the mode to use for the system: item or area. A Tax System with Tax Mode Area allows tax rates to be entered at the Header level, while Tax Mode Item only allows rates to be entered at the item level. An example of an Area system is in the United States (US) where all items of a specific area are taxed at a specific Area rate (with possible exemptions at the item level). The Item type system is used in the United Kingdom (UK). In the UK, regardless of the location of the sale, taxes are based on each item of the sale (commonly referred to as a Value-Added Tax or VAT system). Canada uses both types of systems. Its item based tax is called a Goods and Services Tax (GST) while the area system is referred to as Provincial Sales Tax (PST).

Prompt on Line Item

Select this check box if you want to prompt for this tax code on the line item level in purchasing, sales/parts orders, and estimating.

Active For Purchasing

Select this check box if you want to prompt for this tax code in purchasing and accounts payable. If the check box is cleared, this tax code is not prompted for in purchasing or accounts payable.

Use Wholesale Price

Select this check box to display the wholesale price on the Items form and use this value for tax calculation. This field causes a secondary unit price to be displayed and updated on the Items form. This price is then used to calculate taxes in place of the real Item unit price.

Apply to Progressive Billing

Select this check box if the progressive billing invoices are to include tax.

Record Zero Rated

Select this check box to save a Sales Tax record in the Invoice Sales Tax record when the tax rate for the entire invoice is zero.

Include Tax in Discount/Allowance

Select this check box to include discounts or allowances when calculating the Sales Tax amount on the A/R Payment Distributions form and A/P Payment Distributions form. When this check box is cleared, the Sales Tax amount is not calculated and the field is hidden on the A/R Payment Distributions form and A/P Payment Distributions form. When you select this check box, the Next Level Tax Code field is disabled on the Tax Codes form.

Tax ID Prompt Location

Select the type of location to prompt the Tax ID: customer, vendor, or both.

Item Tax Code

Select the Tax Code to use as a default when adding new items on the Items form.

AR/AP Tax Code

Select the Tax Code to use as the default Tax Code for freight and miscellaneous charges when adding invoices or vouchers.

Freight Tax Code

Select the default Tax Code to be used in Freight Tax Code when adding a new sales order or purchase order.

Misc Tax Code

Select the default miscellaneous Tax Code to use when adding a new sales order or purchase order.

Customer/Vendor Tax Code

Select the Tax Code to use as a default when adding new customers or vendors.

Commission Tax Code

Select the Tax Code to use when tax is paid with commissions in the A/P Payment Distribution function. When the Commission Tax Code is entered, the rate specified by that tax code is used to calculate taxes on commissions. If this Tax Code is left blank, then no tax is calculated on commissions.

Note: If a multi-level tax code is entered for this field, only the first rate is used in the calculation.

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Non-A/P Tax Code

Select the tax code to use when tax is paid with Non-A/P Payments in the A/P Payment Distribution function of Accounts Payable. When the non-A/P tax code is entered, the rate specified is used to calculate taxes for non-A/P payments. If the code is left blank, no tax is calculated.

Note: If a multi-level tax code is entered for this field, only the first rate is used in the calculation.

Non-A/R Tax Code

Select the tax code to use when tax is paid with non-A/R payments on the A/R Payment Distributions form. When the non-A/R tax code is entered, the rate specified is used to calculate taxes for non-A/R payments. If the code is left blank, no tax is calculated.

Note: If a multi-level tax code is entered for this field, only the first rate is used in the calculation.

• Tax Code Label
• Tax Code Description Label
• Tax Code Item Label
• Tax Code Item Description Label
• Freight Tax Code Label
• Freight Tax Code Description Label
• Misc Tax Code Label
• Misc Tax Code Description Label
• Amount Label
• Accumulated Amount Label
• Tax ID Label

These tax code labels are used throughout the system.