Assigning tax codes to your company

With your company and tax codes in place, you can assign tax codes to your company.

You assign tax codes to transactions so the application can calculate and track tax information.

If you chose to define general ledger accounts at the tax code level, the tax information you see is detailed. You can see landed costs, invoiced and accrued taxes, and dates when the application calculates tax (invoice, shipping, or payment date).

Input and output due accounts are part of the general ledger accounts you define. Input and output due accounts are required at the tax code level if you select Yes in the Use Tax Code Accounts field and your tax point date is set to Payment Date.

If you assign general ledger accounts at the company level, you cannot assign them at the tax code level too.

VAT Return Reporting uses tax codes you define on Tax Code Master (TX01.1). When you assign tax codes to a company that uses VAT Return Reporting, you must define additional VAT parameters.

This procedure gives instructions for assigning tax codes to a company.

Assign tax codes to a company

  1. Access Tax Code Maintenance (TX02.1).

    Use Tax Code Maintenance (TX02.1) only if you selected Yes in the Use Tax Code Accounts field on Company (TX00.1). If you selected No on TX00.1, the parameters you defined on TX00.1 are used instead.

  2. Select the Main tab to define valid tax codes and general ledger accounts for your company.
  3. Specify this information:
    Invoice or Accrued Tax

    Specify how the tax code affects taxable transactions (invoiced or accrued).

    If you are creating a tax code for use with a European Community company, you must select Accrued in this field.

    Tax Point

    Specify the date at which you want the application to recognize sales tax (invoice date, payment date, shipping date, or general ledger posting date).

    Tax Terms

    Specify whether the application calculates tax before or after payment terms are applied.

    Land Cost Flag

    Specify whether the tax on an item is to be included in the item's cost.

    Note: Both the Land Cost Flag and the Allow Account Changes fields must be set to Yes to automatically link related tax distributions to asset distribution lines.
    Allow Account Changes

    Specify whether you can override the default general ledger accounts at tax calculation time.

    Note: Both the Land Cost Flag and the Allow Account Changes fields must be set to Yes to automatically link related tax distributions to asset distribution lines.
    Accounts Payable Tax Accrual Code

    Select the accounts payable accrual account that you previously defined by using Invoice Accrual Code (AP05.2).

  4. Select the Tolerance tab to define tolerance checking options.
  5. Specify this information:
    Limit

    Specify the minimum taxable amount for tolerance checking. Tolerance checking applies to verifying a tax amount (for example, the Accounts Payable application would verify a sales tax amount on an invoice that is ready to be paid). If the taxable amount is equal to or greater than the amount here, it could result in an error unless a rate range is specified and the tolerance rate falls within the range specified.

    If you leave this field blank and the rate range blank, that means that there is zero tolerance (the tax amount to be verified must be exactly the same as the system-calculated tax amount).

    Rate Range

    This field contains the lowest to the highest acceptable tax rate for tolerance checking. Tolerance checking applies to verifying a tax amount. Any transaction with a tax rate outside of the range you define results in an error.

    Amount

    Specify the tax tolerance amount for tolerance checking. Tolerance checking verifies a tax amount (for example, the Accounts Payable application verifies a sales tax amount on an invoice that it is preparing to pay). If the difference between the passed tax amount and the system-calculated tax amount exceeds the tax tolerance amount, an error results.

  6. If you are using VAT Return Reporting, select the VAT Fields tab to assign VAT parameters to your tax code and company.
  7. Specify this information:
    VAT Type

    Select the VAT type for the tax transactions covered by this tax code. The options are D (Domestic), E (Intra-EEC), I (Import), and X (Export).

    If you are creating a tax code for use with a European Community company, you must select E (Intra-EEC).

    Goods or Services

    Select G (Goods) if the tax transactions covered by the tax code apply to goods. Select S (Services) if the tax transactions apply to services.

    Triangulation Indicator

    Select Y (Yes) if the transactions covered by the tax code are triangulated (involve more than two countries). Select N (No) if the transactions are not triangulated. The triangulation referred to here pertains to the shipping of goods. It bears no relationship to currency triangulation.

  8. If you are using VAT Return Reporting, assign a different tax code for each combination of VAT parameters your company must report on. For example, if you have both intra-EEC and domestic reportable transactions, assign a tax code for each of these VAT types.
  9. Select the Add form action.

Related Reports and Inquiries

To Use
List tax code and company combinations. The report shows tax codes, general ledger accounts, and accrued or invoiced taxes. Tax Code Listing (TX202)
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