Sales tax reporting needs can vary significantly for companies depending on the number of taxing entities they report to or the number of different sales tax rate percentages their product line requires. This option offers more flexibility and detail than the flat tax rate per location option.
This optional area at Setup / A/R / Sales Tax Codes allows any state, county, and municipal taxes that might apply to charges in the market area to be defined.
Setting up State Codes
To set up a state code, select Add below the State Codes area. This will add a line in the grid. The following information will need to be filled out:
- Tax ID – The Tax ID can be up to 15 characters and identifies the tax code. Add a state code for each state from which sales tax will be collected. It is recommended to add a None option for situations where only the Adjustment Code is applicable to the sale.
- Rate Adjustment – This is the percent of tax the State Code represents. If the sales tax rate is 6.875%, then the Rate Adjustment would be 6.875.
- Tax Cap – The Tax Cap is the maximum dollar amount of sales tax which can be collected per sales transaction for the State Code. The Tax Cap column is optional.
Setting up Adjustment/Sub Codes
An Adjustment Code is an additional tax which can be added to the State Tax Codes on an Invoice. This tax can represent items such as city tax, county tax, transportation tax, public safety tax, and more. The Adjustment Code can be added to an Invoice that does not have a State Tax Code.
To set up an Adjustment Code, choose Add below the Adjustment Codes area. This will add a line in the grid. The following information will need to be populated:
- Tax ID – The Tax ID can be up to 15 characters and is the link to what the Adjustment Code represents. Add an Adjustment Code for each city, county, or other taxing body for which sales tax will be collected in addition to the State Tax Code. It is also recommended to add a None option to be used in cases where only the State Tax Code is applicable to the sale.
- Rate Adjustment – This is the percent of tax the Adjustment Code represents. If the tax rate is 0.5%, then the Rate Adjustment would be 0.5. Additional codes can be added under the Sub Codes column by selecting Setup. This would be done if the Adjustment Code is composed of more than one tax.
- Tax Cap – The Tax Cap is the maximum dollar amount of tax which can be collected per sales transaction for the Adjustment Code. This field is optional.
- Sub Codes – If an Adjustment Code represents multiple rates, Sub Codes can be used to layer on the additional Tax Codes to an Invoice. For example, if an area has a city, county, and transportation tax in addition to the State Tax Code, a Sub Code could be set up under the Adjustment Code so all three of the taxes display on the Sales Tax Summary report.
- Sub Code – The Sub Code can be up to 15 characters and will be the link to what the Sub Code represents.
- Rate – This is the percent of tax the Sub Code Represents.
The following are examples of Sub Codes that represent the combination of taxes. The Hennepin-Tran is a combination of a county and transportation tax that can be added to the State Tax Code. The Henn-Mpls-Tran is a combination of a city, county, and transportation tax that can be added to the State Tax Code.
Setting up the Location
Once all of the State and Adjustment Codes are set up, select which State/Adjustment Codes to use for each Location. This is found at Accounting / Setup / Locations Edit the desired location and choose the G/L Posting tab.
Select the default State and Adjustment Codes for each Location. If the Location does not have an additional tax to be collected, select the None Adjustment Code. This will need to be done for each Location.
Change Code on an Invoice
To change the Tax Rate or State/Adjustment Code, go to the Tax tab on the Invoice. Double click in the State and/or Adjustment Code columns to select the new codes to be charged to the customer.
Changes made on the Tax tab apply only to the customer on the split who is currently being viewed. To apply the changes to other customers in the split, select Apply to All Customers.
