M3 Sales Tax Concepts Related to Supplier Invoices

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

Costing elements for tax

Costing elements for tax are defined with costing operator 90-'Calculation base for tax' in 'Costing Element. Open' (PPS280). The tax code to be used in the calculation of tax is specified in the 'Tax code' field. Charge type 1-'Internal' or 2-'External charge', charge invoicing 2-'Several times', and distribution method 1-'Line unique' must be selected for costing elements with costing operator 90.

Costing model for tax

A costing model, defined with a calculation base for tax, is connected to the costing element for tax in 'Costing Elements. Enter Values' (PPS282) by a selection in the field 'Costing model'. The costing model is used to retrieve the calculation base for sales tax, use tax, or transaction tax.

Calculation base for tax

The calculation base for tax consists of other costing elements, for example the gross or net line amount and the amount calculated on other costing elements. The tax calculation is done by multiplying the tax rate retrieved from the geographical code connected to the purchase order line by the calculation base retrieved from the costing model for tax. Costing models are defined in 'Purchase Costing Model. Open' (PPS285). The calculation base is defined by adding costing elements to the costing model in 'Costing Model. Connect Elements' (PPS286), reached by using related option 11='Costing Element/Model'.

Sales Tax on Purchase Orders

To enable sales tax on a purchase order, a geographical code is specified on each purchase order line where tax should be calculated. The geographical code is proposed from the receiving warehouse but can be changed. The tax rate connected to the geographical code is used to calculate tax on a costing element.

The calculation of sales tax is performed for each costing element in the purchase costing model that is defined with operator 90. This is how the calculation of sales tax and other tax surcharges is performed:
  1. Retrieve the costing model for tax connected to the costing element.
  2. Retrieve the calculation base by adding the amounts calculated on the costing elements included in the costing model for tax.
  3. Retrieve the tax rate connected to the geographic code on the purchase order line and the tax type on the tax code on the costing element.
  4. Calculate the tax by multiplying the calculation base by the tax rate.
  5. Update the amount on the costing element with operator 90 with the calculated tax amount.

Line charges connected to a purchase order line are displayed in 'Purchase Order. Connect Charges' (PPS215). In (PPS215) lines charges can be added, deleted, or changed. However, line charges with operator 90 cannot be changed. The reason is that the tax amount is calculated based on the net amount on the order line and the amount on other charges, based on the definition of the costing model for tax.

The amount on a line charge with operator 90 will be recalculated if the net line amount or the amount on a charge included in the costing model for tax is changed.

Use option 5='Display' to display tax details for a line charge with operator 90.

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