M3 Sales Tax Concepts

This section describes the general concepts and settings that are used when managing M3 sales tax.

Tax jurisdiction levels

The jurisdiction levels used for sales tax are defined in 'Settings - Sales Tax' (CRS793). It is possible to define five jurisdiction levels.
Note: For Indian tax, only three jurisdiction levels are supported.

The field 'State jurisdiction level' in (CRS793) indicates the state jurisdiction level where the state code will be specified. The names of the jurisdiction levels will be used as fields in (CRS137), (CRS138), and (CRS139).

Geographical codes

Geographical codes indicate a taxing jurisdiction. The geographical codes are defined and maintained in 'Geographic Code. Enter Jurisdiction' (CRS137).

A geographical code is defined with a set of jurisdiction levels as defined in 'Settings - Sales Tax' (CRS793). The state code used for the state level jurisdiction must be defined in 'States per Country. Open (CRS046)'. Geographical codes can be selected for divisions in 'Company. Connect Division' (MNS100), customers in 'Customer. Open' (CRS610), customer addresses in 'Customer. Connect Addresses' (OIS002), warehouses in 'Warehouse. Open' (MMS005), drop boxes in 'Ship-Via Address. Open' (CRS300), and supplier addresses in 'Supplier. Connect Address' (CRS622).

Tax rates for geographical codes are defined per jurisdiction level in 'Geographic Code. Enter Tax Rate (CRS138)'.

Tax types

These are the tax types used for sales tax:
  • 1-'Sales tax'
  • 2-'Seller use tax'
  • 3-'Rental tax'
  • 4-'Service tax'
  • 5-'Tax surcharge'
These tax types are used for sales tax in India:
  • 1-'Sales tax'
  • 2-'Additional excise duty'
  • 3-'Basic excise duty'
  • 4-'Customs duty'
  • 5-'Special excise duty'
  • 6-'Secondary and higher education'
  • 7-'Surcharge on sales tax'
  • 8-'Turnover tax'
  • 9-'Value added tax'

Tax rates

Tax rates are defined per geographical code in 'Geographic Code. Enter Tax Rate' (CRS138). Tax rates are specified for each jurisdiction level in a geographical code. To manage sales tax on customer invoices it is recommended to define both tax type 1-'Sales tax' and 2-'Seller use tax' tax rates for each geographical code. This is relevant when goods are delivered both within one state and across state borders. In general, tax type 1 is used on intrastate sales and tax type 2 is used on interstate sales. However, Nexus, drop boxes, and tax point also influence the tax decision. On supplier invoices the tax type selected for the tax code will be used to retrieve the tax rate.

Tax code

Tax codes are used to indicate if an item, charge, customer, ship-to location, supplier, or costing element with costing operator 90 is taxable for sales tax, and what tax type to use. Tax codes are managed in 'Tax Code. Open' (CRS130). Tax codes are used when defining tax exemptions in 'Geographic Code. Enter Exemptions' (CRS139).