Completing tax setup

To use the Tax application, you first define a tax company and specify how you want to track taxes. You define how much detail you want to see, which tax authorities you are required to pay, and what tax rates you will apply to transactions. This procedure describes the process of completing required and conditional tax setup.

Procedure flow: Completing tax setup

Before you define your tax company in the Tax application, you must define a company in the General Ledger application. For more information, see Getting Started with Lawson Applications.

Complete tax setup

  1. Define a tax company using Company (TX00.1).
  2. Specify this information:
    Tax System

    Select which tax system is being used. You can select the Lawson Tax application, or interface to the third-party Vertex system.

    Use Tax Code Accounts

    To define general ledger posting accounts at the company level, select No and define the accounts you want to use in the remaining fields. To define the accounts at the tax code level, select Yes. Defining accounts at the tax code level provides more detailed posting information.

    Taxable Amount Edit

    If the Taxable Amount Edit field is set to yes, then the total taxable amounts on the lines are edited against the total taxable amount on the invoice header.

  3. Define the tax codes your company requires using Tax Code Master (TX01.1).
  4. Specify this information:
    Tax Type

    You select what type of tax code you are defining. A tax code can be used in one of three ways:

    • Tax Table Code: No rates are assigned to this type of code. It shows multiple tax codes and requires a tax table.

    • Stand-alone Tax Code: These codes have rates assigned to them and can be used as a stand-alone code or as a member of a table.

    • Table Member: These codes have rates assigned to them and can only be used in a tax table.

    • Calculated Rate : These codes are used on a tax code when the tax amount on an invoice includes taxes from multiple taxing jurisdictions and the exact tax rate is unknown.

      Calculated rate types are only used for AP invoice entry. You cannot setup a tax rate in the tax system for tax codes with a Calculated Rate type. The rate is calculated from the information provided on the invoice. Calculated tax type codes cannot be used on a tax table.

    Note: If you only define one tax code on a tax table, consider defining the tax code as a stand-alone code.
  5. If you defined any tax codes with a type of Tax Table Code, set up a tax table using Tax Tables (TX01.2).
  6. Specify this information:
    Effective Date

    Assign an effective date to the tax table. The Tax application uses the most recent effective date on or before the transaction date to determine which tax table to apply to a transaction.

    Tax Code

    A tax table lets you apply multiple tax codes to a transaction. Select all of the tax codes you want include. For example, you can include both a city and state tax.

    Taxable Effect

    Specify what the effect is on taxable amounts for the next code in the table. You can select Add to Taxable, Subtract from Taxable, or No Effect. For example, if the original taxable amount was $100 and the first tax code in the table was 10%, the next tax code would be applied to an amount of

    • $110, if you selected Add to Taxable

    • $90, if you selected Subtract from Taxable

    • $100, if you selected No Effect

  7. Define rules for your tax codes using Tax Code Maintenance (TX02.1).
    1. Assign general characteristics to the tax code on the Main tab.
    2. Specify this information:
      Invoice, Accrued Tax

      Select how the tax code will affect a taxable transaction. An accrued tax has no effect on the transaction's amount. An invoiced tax is already imbedded in the transaction amount.

      Tax Point

      Select the date at which you want the system to calculate sales tax.

      • If you select Invoice Date, tax is calculated when you release an invoice.

      • If you select Shipping Date, tax is calculated when you perform shipping feedback.

      • If you select Payment Date, tax is calculated on the date of payment.

      • If you select GL Date, tax is recognized on the general ledger posting date.

      Tax Terms

      Select whether the system is to calculate tax before or after payment terms are applied. You define payment terms in Terms. Select B (Tax Before Terms) in this field if you want the system to calculate tax before payment terms are applied. Select A (Tax After Terms) if you want the system to calculate taxes after payment terms are applied.

      Tax Identification

      Specify the company's tax identification or registration number for the tax authority.

      Land Cost flag

      This field is used in conjunction with Purchase Order and Inventory Control. Select whether the tax on an item is to be included in the item's cost.

      Allow Account Changes

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

      Accounts Payable Tax Accrual Code

      A user-defined code representing an accounts payable accrual account.

      Input

      The Input Account is a GL account to post the tax expense to. For example, sales tax expense.

      Input Due Account

      The Input Due Account is a temporary general ledger account to post the tax amount to when invoicing and when the tax point date is set to Payment Date.

      When the company pays the vendor, the tax posting is moved from this account to the Input Account. Input taxes are paid by the company through the Accounts Payable application.

      Output

      The general Ledger Accounting Unit for output taxes. Output taxes are collected by the company through Accounts Receivable. This field is required for stand-alone and tax member tax codes. It is not required for tax table tax codes.

      Output Due

      The general ledger accounting unit for output due accounts. This account is a temporary account to post the tax amount to when invoicing and the tax point date is set to Payment Date. When the customer actually pays the invoice, the tax posting is moved from this account to the output accounting unit.

    3. Assign information that is used during tolerance checking on the Tolerance tab.
    4. Specify this information:
      Limit

      Specify a minimum taxable amount for tolerance checking. Tolerance checking applies to verifying a tax amount (for example, Accounts Payable 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 specified here, it could result in an error unless a rate range is specified and the tolerance rate falls within the range specified.

      Rate Range

      View the lowest acceptable tax rate for tolerance checking. Any transaction with a calculated tax rate outside of the range you define results in an error.

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

      Amount

      Specify the tax tolerance amount for tolerance checking. If the difference between the passed tax amount and the system-calculated tax amount exceeds the tax tolerance amount, an error results.

    5. Assign information about value added tax in the VAT Fields tab.
    6. Specify this information:
      VAT Type

      Specify the type of transaction the tax code is used for.

      Goods or Services

      Select whether the tax code applies to goods or services. If the tax transactions covered by the tax code apply to goods, type or select G (Goods) in this field. However, if the tax transactions covered by the tax code apply to services, specify or select S (Services) in this field.

      Triangulation Indicator

      Select whether the transaction on which the tax code is specified involves a triangulation transaction (one with more than two countries involved).

  8. Assign tax rates to the tax codes using Tax Rate (TX03.1). You can define several tax rates for the same code with different effective dates.

Related reports and inquiries

To Use
List released or historical tax information Tax Analysis Report (TX100)
List tax transactions that are specified on a VAT Return VAT Returns Report (TX120)
List all intra-EEC sales transactions reported on your company's VAT returns reports EC Sales Report (TX130)
List tax companies and their details, such as tax systems and general ledger accounts. Tax Company Listing (TX200)
List tax codes you have defined Tax Code Master Listing (TX201)
List the tax code and company combinations you defined in Tax Code Maintenance (TX02.1) Tax Code Listing (TX202)
List tax rates and their descriptions Tax Rate Listing (TX203)
List tax transactions that you created manually Tax Transaction Listing (TX204)
List an audit report of tax transactions in vendor-customer sequence Vendor-Customer Tax Audit (TX220)
List an audit report of tax transactions in numerical sequence Tax Transaction Audit (TX221)
Delete all historical, fully processed tax transactions Tax History Purge (TX300)