Setting up a Sales Use Tax master record

You must define a tax master record for each jurisdiction type-group combination in which you are required to collect, report, and pay taxes. Define all relevant combinations of:

  • Tax jurisdiction types, such as 1=Federal, 2=State, 3=County, 4=City, and 5=Other.
  • Tax groups, such as standard, luxury, exemption, hazardous waste, freight, or industry tax-related groups.
  • Tax rate amounts, such as sales, use, excise, or transit taxes.

For example, you can create a tax master record for each of these combinations:

  • State standard sales tax
  • State luxury sales tax
  • County standard sales tax
  • City hazardous waste tax

To create or edit a tax master record for Canadian taxes, use SA Goods and Services Tax Setup.

To create or edit a tax master record for a country that collects VAT, such as the United Kingdom or Mexico, use SA Value Added Tax Setup.

To create or edit a tax master records for United States taxes, use SA Sales Use Tax Setup.

Caution: 
Sales and Use Tax System users: If you use the Sovos Interface, you must define the state or province, and the General Ledger account. Sovos processing handles the remaining data. For example, in the Amounts section, retain the 0.000 tax rates. Tax rates are calculated by Sovos. In the Addons view, be aware that freight in and freight out may or may not be taxable based on the state. This tax group, for Sales and Use Tax System product code 40000, must be assigned to these addons to identify them as freight. For Sales and Use Tax, you can create Addons only for the combination of State-Standard.

Use these example instructions to create a Sales Use Tax master record for a jurisdiction type-group. Your exact steps can vary.

  1. Select System Administrator > Setup > Sales Use Tax.
  2. Click New.
  3. Specify this information:
    Type
    Select State.
    Group
    Select the group this tax record belongs to.
    State

    Specify the two-digit code of the state.

    If the record is for... Then specify these values for the State code
    a US state, the two-digit state abbreviation
    a Canadian province, CN
    any other international jurisdiction, IT or the correct country code

    The Type and Group are always required. The other required values are determined by the Type. For example, if you select State, then the State field is also required. If you select Other, then all fields are required: State, County, City, Other, Description. Each combination of Type and Group determines what fields are required when you create a new record.

    Be aware, you must create and save prerequisite records in order to create a more granular record. For example, if your tax is at the city level, create a State record first: Type=State, Group=Standard. Then, create a County record: Type=County, Group=Standard, State, County, Description. Then, create a City record: Type=City, Group=Standard, State, County, City, Other, Description.

  4. Click Save.
  5. In the General view, in the Tax Master section, optionally, specify the Tax ID number that is assigned to the company.
  6. In Description, the Type and State specified in step 3 default here.
  7. If your SA Company Setup-Tax Interface is System Rates, in Origin/Destination, specify whether tax(es are assessed for this jurisdiction based on the origin of the sales order or the destination to which the goods will be shipped:
    1. Origin: The origin is determined by the ShipFrom warehouse location on the Sales Order Entry header. Select Origin to calculate taxes based on the origin of the sales order. Taxes are calculated by the system based on the rates set up for the jurisdiction assigned to the shipping warehouse record: Product Warehouse Description Setup. Exceptions are:
      • When the ShipFrom state and the ShipTo state are different, the use tax rate from SA Sales Use Tax Setup is used in the tax calculation.
      • When the ShipFrom state and the ShipTo state are different, the ShipTo state from SA Sales Use Tax Setup rates are used in the tax calculation.
      • When the ShipFrom state and the ShipTo state are the same, the sales tax rate from SA Sales Use Tax Setup is used in the tax calculation.
      • When the ShipFrom state and the ShipTo state are the same, and the state is an origin state, the taxes are calculated based on the SA Sales Use Tax Setup tax data for the ShipFrom location.
      • When the ShipFrom state and the ShipTo state are the same, and the state is a destination state, the taxes are calculated based on the SA Sales Use Tax Setup tax data for the ShipTo location.
    2. Destination: The destination is the ship-to location indicated on the Sales Order Entry header. If you select Destination, taxes are calculated by the system based on the jurisdiction set up in Customer Setup or Customer ShipTo Setup.
    3. Other: Select Other if you have made custom modifications to the program.
    The origin/destination setting must be set based on state taxing authorities. For example, the State of Colorado is a destination state. Any orders shipped from a location within the state are taxed with the rates set up for the destination’s jurisdiction, the ShipTo, whether that be intrastate or interstate. You must check each state taxing authority with which you do business to determine whether that state is an origin or destination state.
    Note: If you are using Sovos GTD, or AvaTax, or Vertex Cloud, the Origin/Destination value does not impact your implementation because these applications calculate these use taxes.
  8. In the Amounts section, specify an applicable Sales Rate, Use Rate, Transit Rate, Excise Rate for this jurisdiction.
  9. If excise taxes for this jurisdiction are applied as a flat rate rather than based on a percentage, specify the flat excise rate to be assessed.
  10. Specify Line or Unit to indicate whether the flat excise tax is assessed per line item or per unit.
  11. Specify a maximum tax amount to be charged, if applicable.
  12. In the Compare To field, specify whether the maximum tax amount to be charged is based on Invoice, Line Amount, or Line.
  13. Click Addons.
  14. In the grid, specify Standard in the Tax Group column for each addon that should be taxed as freight. Specify Yes in the Taxability column for each addon that should be taxed.
  15. Click General Ledger.
  16. Specify GL account numbers. Tax amounts accumulate in this accounts.
  17. Click Save.
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