Setting Up a Parametric Tax System

Note: This topic is intended to help US companies set up Service Management systems to properly handle sales tax. The system must be completely set up before any transactions are entered. Once the system is initialized, it will charge sales tax on sales orders and calculate sales tax on purchase orders. The system will generate proper tax records for invoicing taxable orders.

On the General tab of the General Parameters form, select the Capitalize State Abbreviations field. The system then capitalizes the state abbreviation in addresses.
On the Tax Systems form, Service Management presumes that the main tax system (Sales Tax) will be set up with Tax Mode set to Area for US companies. Most of the parameters on this form should be left at their default value, except these:
- Specify Taxable in the Tax Code Label field.
- Specify Federal ID in the Tax ID Label field.
- Set up a default Customer/Vendor Tax Code with a "Rate" tax type.
On the Tax Parameters form, set the field values according to your company's specific reporting and functionality requirements. The usual field values for US companies are:
- Cash Rounding Factor: 0.00
- Prompt for Tax Discount: cleared
- Print Tax Codes on Invoice: cleared
- Print Tax Footer on Invoice: cleared
- Prompt for State Tax: selected
- Two Exchange Rates: cleared
On the Tax Codes form, at least one tax code with a "Rate" tax type must already have been created in Step 2. In general, for tax codes with a "Rate" tax type in the US, the Include Price and Include Misc. fields should be selected.

Create another tax code to accommodate sales tax exempting, with these values:

Tax System: 1
Tax Code Type: Exemption
Tax Code: N
Description: Sales Tax Exempt
Tax Rate: 0.00
Assess on Return: cleared

The Service Management system is now ready for valid transactions to be entered. If the defaults in the Tax Systems form have been entered accurately, new customers entered into the Customers form will have appropriate tax codes. Therefore, when sales orders and purchase orders are entered, they will use the proper defaults and have the correct sales tax applied.