CHAPTER 6: SALES TAX SETUP

Transcription

1 Chapter 6: Sales Tax Setup CHAPTER 6: SALES TAX SETUP Objectives Introduction The objectives are: Provide an overview on sales tax Create Ledger Posting Groups Create Sales Tax Authorities Create Sales Tax Settlement Periods Create Sales Tax Codes Create Sales Tax Codes Intervals Create Sales Tax Groups Create Item Sales Tax Groups Set up Sales tax jurisdictions. Create Sales Tax Transactions Create Sales Tax Exempt Data Calculate and Post Withholding Sales Tax The requirements for tax calculation and tax reporting differ significantly for different countries. Therefore, the tax module of a true international Enterprise Resource Planning (ERP) system must be comprehensive. In Microsoft Dynamics AX 2009, the tax module offers many different options for: Tax calculation Posting Reporting This course explores the extensive functionality for sales tax handling. 6-1

2 Financials I in Microsoft Dynamics AX 2009 Sales Tax Overview All businesses must collect and pay taxes to various tax authorities. Different countries have different rules and rates. In some countries, the rules differ between states or counties. This topic provides a general overview on taxes, with the focus on sales taxes, although the tax system in Microsoft Dynamics AX 2009 can process many kinds of taxes and duties. The sales tax system within Microsoft Dynamics AX 2009 functions as follows: The user specifies where to post sales taxes by entering a ledger account in the Ledger posting groups. The user specifies the sales tax authorities by using the Sales tax authorities form. The user specifies when and how frequently to settle under sales tax settlement periods. The user defines how much to collect or pay as a certain amount or percentage; the user sets this up under the Sales tax codes. The system determines whether a sales tax should be imposed on a sale or purchase order through a combination of the Sales tax group and the Item sales tax group. Sales Tax Overview - Suggested Steps The image illustrates the steps for setting up tax information. If you follow the steps in this order, you can avoid having to go back and forth between dialog boxes in Microsoft Dynamics AX FIGURE 6.1 SALES TAX SETUP 6-2

3 Chapter 6: Sales Tax Setup When you buy an item from a vendor or sell an item to a customer, the system must calculate all the applicable sales taxes. The calculated sales tax in Microsoft Dynamics AX 2009 is based on the sales tax codes included in both of the tax groups that are attached to the customer or vendor and the item. Sales Tax Overview- Example The following table shows the: Sales tax setup for a customer and an item Attached tax groups and the associated tax codes If you sell the item P Lamp to customer TTL Tire, the system calculates the sales taxes based on tax codes CA and Fed because those codes exist in both groups. Ledger Posting Groups FIGURE 6.2 AFFECT OF SALES TAX CODES ON SALES TAX CALCULATION When you attach settlement period and posting group to the tax codes, you specify how to post and pay the taxes. Finally, you can set up the tax reporting on the sales tax code. The ledger posting groups control the automatic posting of sales taxes in Microsoft Dynamics AX You must create the accounts that General Ledger uses in the Chart of Accounts before you can use them to set up the ledger posting groups. The following characteristics apply to ledger posting groups: A ledger account is updated automatically when the system calculates taxes and updates invoice posting. The system attaches the ledger accounts that the taxes are posted in to the sales tax code. 6-3

4 Financials I in Microsoft Dynamics AX 2009 Because each ledger account can use several tax codes, a ledger posting group determines posting. Each ledger posting group can contain several ledger accounts. The description field for that account indicates the way each account is used. You can set up ledger accounts that have the posting type Sales tax to select the accounts in the Account group form. Changes that you make to the ledger account numbers in Ledger posting groups only affect transactions that have not yet posted. Ledger Posting Groups - Types of Accounts The number of accounts you must set up depends on the use of the group and national law. For example, you can set up accounts for: Sales-tax payable Use-tax payable Settlement account Procedure: Create Ledger Posting Groups - Overview Tab Follow these steps to create ledger posting groups: FIGURE 6.3 ACCOUNT GROUP- LEDGER POSTING GROUPS FORM 1. Click General ledger, then click Setup, then click Ledger posting groups, and then click the Overview tab. 2. Enter a unique name for the ledger posting group in the Ledger posting group field. 3. Enter a meaningful name to describe the ledger posting group in the Description field. The description appears on reports and other areas throughout Microsoft Dynamics AX

5 Chapter 6: Sales Tax Setup HINT: Describe the groups so that you can recognize them. This description appears with the code of the ledger posting group. 4. Select the ledger account in the Sales tax payable list, where you must post the outgoing sales tax as part of the company's revenue. The system debits the outgoing tax in the customer account and then credits this account. Debits automatically are recorded in the account and settled upon payment of the taxes. The ledger accounts available in the Sales tax payable list are the posting type of sales tax on the Setup tab in the Chart of accounts form. However, if you want to select other ledger accounts, click According to account type in the Sales tax payable, Use tax payable or Settlement account lists. Create Ledger Posting Groups - Posting Example Here is a brief example about posting sales taxes. These sales taxes are collected by the company on behalf of the tax authority when you sell taxable goods and services. The amount you receive includes the sales tax. For example, if a customer makes a purchase of USD and the tax amount is 5.00 USD, the ledger transactions are as follows: Ledger account Debit ($) Credit ($) Customer account 100 (Accounts Receivable) Sales tax payable* 5 Sales account (domestic) 95 ** The sales tax payable line represents the ledger account specified in the Sales tax payable field on the Ledger posting group form. The system credits this account for sales tax amounts received from customers and debits the appropriate customer accounts. 6-5

6 Financials I in Microsoft Dynamics AX 2009 Procedure: Create Ledger Posting Groups - Sales Tax Receivable Follow these steps to create sales tax receivable ledger posting groups: 1. Select the ledger account for incoming taxes (receivable from the tax authority) in the Sales tax receivables list. Vendors collect these taxes on behalf of the tax authority when the company purchases taxable goods and services, and the amount paid to the vendor includes taxes. For example, if a vendor sends an invoice of USD, of which 5.00 USD is value-added tax, the ledger transactions are as follows: Ledger account Debit ($) Credit ($) Vendor account 100 (Accounts payable) VAT paid (Sales tax 5 receivable)** Inventory account (Expense account) Enter the ledger account for posting deductible incoming taxes that vendors do not claim or report to the tax authority in the Use-tax expense list. NOTE: If the Apply US sales tax and use tax rules check box is selected on the General Ledger Parameters form on the Sales tax tab, the Sales tax payable field is unavailable. Instead, the system debits sales taxes paid to vendors as expenditures (costs) to the same accounts as the purchases. Procedure: Create Ledger Posting Groups - Use Tax Payable Follow these steps to create use tax payable ledger posting groups: Enter the ledger account that offsets the use tax expense for taxes that vendors do not claim in the Use tax payable list. The way you use this account depends on the type of tax system your company chooses. Non-U.S. taxes - You must indicate a use tax expense account for the Ledger posting group. For any sales tax groups that contribute amounts to this ledger account, you must select the Use Tax field on the Setup tab on the Sales tax group form, found at General Ledger, Setup, Sales tax. 6-6

7 Chapter 6: Sales Tax Setup U.S. taxes - The amount in this account offsets the taxes posted as expenses if the Apply US sales tax and use tax rules check box is selected on the Parameters form. The vendor is not required to collect the tax. However, the company may still owe taxes to a sales tax authority and must track such taxes. An example will be shown in the next lesson section. Create Ledger Posting Groups- Use Tax Payable Example Here is an example that shows the concept of use tax payable. A company buys office supplies on the Internet from an out-of-state vendor. The vendor charges USD for the supplies and no tax. The company may still owe use taxes to the sales tax authority in its own state. The ledger transactions are as follows: Ledger account Debit ($) Credit ($) Vendor account 100 (Accounts Payable) Use tax payable*** 5 Office supplies (Expense account) 105 ***This account represents the ledger account specified in this field. NOTE: This field is visible only when the Apply U.S. sales tax and use tax rules check box is selected in the General ledger parameters form on the Sales tax tab. Procedure: Create Ledger Posting Groups Settlement Follow these steps to create settlement accounts for ledger posting groups: 1. Select the ledger account that the system debits when you pay taxes in the Settlement account list. To ease use, group the account with other ledger accounts in the Chart of accounts that contain posted taxes. The sum of these accounts is the total balance of taxes due. 2. Perform the following on the General tab: o Select the ledger account for posting gains on cash discounts in the Vendor cash discount list. You can use this account to view a more accurate audit trail on the transaction. o Select the account for posting loss on cash discounts in the Customer cash discount list. You can use this account to view a more accurate audit trail on the transaction. 6-7

8 Financials I in Microsoft Dynamics AX 2009 The ledger posting groups have the following characteristics: You can attach them to individual sales tax codes They determine the ledger accounts to which the sales taxes calculated for the sales tax code are posted Test Your Knowledge Each ledger account can use several tax codes. True or False? ( ) True ( ) False Changes that you make to the ledger account numbers in ledger posting groups only affect. ( ) Posted transactions ( ) Deleted transactions ( ) Not yet posted transactions ( ) Posted transactions from previous months Before creating ledger posting groups, you must create a(n) in the General Ledger to link to ledger posting group. ( ) Tax Group ( ) Sales Tax ( ) Account ( ) Group 6-8

9 Chapter 6: Sales Tax Setup Lab Create a Ledger Posting Group In this lab, you will set up ledger accounts and a ledger posting group for use in posting sales tax transactions. Scenario Phyllis is the Accounting Manager for Contoso. Contoso has a new customer in Alabama. A ledger account must be set up to record the sales tax liability and payments made (settlements) to the taxing authority in Alabama automatically. Phyllis asks you to perform these tasks for her. Challenge Yourself! Create an account to record the sales tax payable and the sales tax settlements for the Alabama customer. Set up a new ledger posting group to assign to the Alabama customer to automate postings of sales tax transactions. Need a Little Help? 1. When you create a new account for the sales tax liability for the Alabama customer, use account in the Chart of Accounts. 2. Create a new ledger posting group for the Alabama customer in the Ledger posting form that uses the Ledger posting group ALST (Alabama State Tax). Step by Step Set up the ledger account: 1. On the Navigation Pane, click General ledger, then click Chart of Account details. 2. Press CTRL+N to add a line. 3. In the Ledger account field, enter In the Account name field, enter Alabama state sales tax payable. 5. In the Search name field, enter ALsales tax pay. 6. In the Account type field, click the arrow to select Balance. 7. Click the Setup tab. 8. In the Posting type field, click the arrow to select Sales tax. 9. Close the Chart of accounts form. 6-9

10 Financials I in Microsoft Dynamics AX 2009 Now, set up the ledger posting group: 1. On the Navigation Pane, click General ledger, then click Setup, then click Sales tax, click Ledger posting groups, and then click Overview tab. 2. Press CTRL+N to add a line. 3. In the Ledger posting group field, enter ALST. 4. In the Description field, enter Alabama State Tax. 5. In the Sales tax payable field, click the arrow to select account In the Settlement account field, click the arrow to select account Close the Account group form. 6-10

11 Chapter 6: Sales Tax Setup Sales Tax Authorities Companies pay and report taxes to authorities. The authorities determine when and where the company pays its taxes. Tax authorities can be countries, states, regions, and cities. You can pay sales tax through a vendor or to the sales tax authority directly. To pay sales tax through a vendor, specify the vendor's account number together with the correct sales tax authority. Sales tax payments are transferred by the system to the vendor making the payment. To make payments to the sales tax authority, enter the sales tax authority's address information. Procedure: Create a Sales Tax Authority - Overview Tab Follow these steps to create a sales tax authority: FIGURE 6.4 AUTHORITY FORM 1. Click General ledger, then click Setup, then click Sales tax, click Sales tax authorities, and then click the Overview tab. 2. Enter a unique code for the authorities that you send tax declarations and payments in the Authority field. Microsoft Dynamics AX 2009 uses this code throughout the system to refer to a particular authority. 3. Enter the name of the tax authority in the Name field. It displays on reports and in other areas throughout the system. NOTE: Give the tax authority a name that easy to identify. The name display together with the tax authority code. 6-11

12 Financials I in Microsoft Dynamics AX Select the vendor to make tax payments to the appropriate authorities in the Vendor account list. The sales tax payments then are posted automatically to the settlement account specified in the Ledger posting group. When you select a vendor, the vendor's address is entered automatically. If you leave the field blank, you must pay the tax authorities directly. 5. Select the report layout to print for the tax authority in the Report layout list. Procedure: Create a Sales Tax Authority - General Tab Follow these steps to create a sales tax authority, for fields on the General tab: 1. Select the rounding form to use for rounding the sales tax amount on the General tab in the Rounding form list. This feature is available only for the German and standard sales tax reports. The following rounding forms are available: o Normal - Round up numbers five and higher and round down numbers lower than five to the right of the specified unit. o Downward - Round down any number to the right of the specified unit. o Rounding-up - Round up any number adjacent to the specified unit. o Own advantage - Round any number to the company's advantage. When the system settles sales tax, the total sales tax amount rounds automatically according to the setup on the sales tax authority. 2. Specify: o The general unit for rounding sales tax amounts in the Roundoff field, according to the chosen rounding form. The ledger accounts to post gains and losses for rounding in the Account gain and Account loss fields. EXAMPLE: If you select Own advantage, with a Round-off of 0.10, the system rounds a figure of to and to This ensures that the rounding is always to the advantage of the company. 6-12

13 Chapter 6: Sales Tax Setup Procedure: Create a Sales Tax Authority- Address and Contact Tabs Follow these steps to create a sales tax authority, for fields on the Address and Contact information tabs: 1. On the Address tab, enter the address of the Sales tax authority. 2. Enter the remaining contact information on the Contact Information tab of the Sales tax authority. Create as many sales tax authorities as needed, each with specific address and contact information and report layout. The company can pay sales taxes to the authority directly or through a vendor account created for the sales tax authority. NOTE: If you have not set up the tax authority as a vendor, prepare a manual payment to the tax authority on the appropriate due date. Test Your Knowledge Tax authorities can be. (Select all that apply.) ( ) Countries ( ) States ( ) Regions ( ) Cities Sales tax can be paid by the AX system to? (Select all that apply.) ( ) A client ( ) An employee ( ) A vendor ( ) A sales tax authority 6-13

14 Financials I in Microsoft Dynamics AX 2009 Lab Create a Sales Tax Authority This lab demonstrates how to create a sales tax authority in AX Scenario Phyllis, the Accounting Manager for Contoso, has asked for your assistance in setting up a sales tax authority. Contoso recently started conducting business with a customer in Alabama. A new sales tax authority must be set up to use to report sales taxes to the Alabama authorities. Challenge Yourself! Set up the Alabama sales tax authority. Use ALA for the authority name. Need a Little Help? 1. Click General ledger, then click Setup, then click Sales tax, and then click Sales tax authorities. 2. Create a new sales tax authority. Contoso uses the field value Normal for the rounding method and it rounds to the nearest penny. Step by Step 1. On the Navigation Pane, click General ledger, then click Setup, then click Sales tax, and then click Sales tax authorities. 2. Press CTRL+N to add a new line. 3. In the Authority field, enter ALA. 4. In the Name field, enter Alabama Authorities. 5. In the Report layout field, click the arrow to select U.S. report layout. 6. Click the General tab. 7. In the Rounding form field, click the arrow to select Normal. 8. In the Round-off field, enter Close the Authority form. 6-14

15 Chapter 6: Sales Tax Setup Lab Create and Assign a Vendor to the Sales Tax Authority To make paying the sales tax authorities more efficient, you can assign a vendor to the authority. This lab shows how to assign a vendor. Scenario Phyllis, the Accounting Manager for Contoso, has discovered that assigning a vendor to a sales tax authority has the following advantages: She can make payments as a part of the typical payment routines. When she runs the Sales tax payment periodic job, the amount the company owes the sales tax authority transfers to the sales tax authority's vendor account. During the company's usual payment routine, the payment to the sales tax authority is created automatically with payments to other vendors. To automate payments to the Alabama sales tax authority, Phyllis has asked you to set the Alabama sales tax authority up as a vendor. Use the following information for the vendor. Field Name Search name Group 10 Value State of Alabama AL tax Terms of payment M15-Month end + 15 days Method of payment Challenge Yourself! USAUSD_CHK Create a vendor for Alabama sales tax. Assign the vendor to the sales tax authority for Alabama. 6-15

16 Financials I in Microsoft Dynamics AX 2009 Need a Little Help? 1. When you add a vendor, Microsoft Dynamics AX 2009 can assign the vendor number because of the Accounts Payable setup in Contoso. Ensure that this setup is correct. 2. Assign the new vendor to the sales tax authority for the State of Alabama. Step by Step Ensure that the setup is correct for automatic vendor numbering: 1. Click Basic, then click Setup, then click Number sequences, and then click Number sequences. 2. Select the AP_001 number sequence. 3. Click the General tab. 4. Make sure that the Manual check box is not selected. 5. Close the Number sequences form. Set up the vendor: 1. On the Navigation Pane, click Accounts payable, then click Vendor details. 2. Press CTRL+N to add a line. In Contoso, because of accounts payable setup, the next available vendor number is assigned automatically. 3. In the Name field, enter State of Alabama. 4. In the Search name field, enter AL tax. 5. In the Group field, click the arrow to select 70- Tax Authorities. 6. Click the Payment tab. 7. In the Term of payment field, use the arrow to select M In the Method of payment field, use the arrow to select USAUSD_CHK. 9. Close the Vendor form. Assign the vendor to the authority: 1. On the Navigation Pane, click General ledger, then click Setup, then click Sales tax, and then click Sales tax authorities. 2. Locate the line for Alabama Authorities. 3. In the Vendor account field, click the arrow to select State of Alabama. 4. Close the Authority form. 6-16

17 Chapter 6: Sales Tax Setup Sales Tax Settlement Periods Sales tax settlement periods specify the intervals when the company reports and pays taxes. The company then can determine which sales tax transactions to report to the authorities and which not to report. The system automatically marks the settlement period when it must report the transaction. After it reports to the authorities, the system prints transactions from the current period. NOTE: If the Include corrections field on the Sales tax tab page in the General ledger parameters form is selected, Microsoft Dynamics AX 2009 automatically prints all transactions that it must include in previous periods. Reporting periods depend on the size of the company, laws, and the authorities. Typical periods could be: Monthly Quarterly Yearly Procedure: Create Sales Tax Settlement Period - Overview Tab Follow these steps to create a sales tax authority: FIGURE 6.5 AUTHORITY FORM 6-17

18 Financials I in Microsoft Dynamics AX Click General ledger, then click Setup, then click Sales tax, click Sales tax authorities, and then click the Overview tab. 2. Enter a unique code for the authorities that you send tax declarations and payments in the Authority field. Microsoft Dynamics AX 2009 uses this code throughout the system to refer to a particular authority. 3. Enter the name of the tax authority in the Name field. It displays on reports and in other areas throughout the system. NOTE: Give the tax authority a name that easy to identify. The name display together with the tax authority code. 4. Select the vendor to make tax payments to the appropriate authorities in the Vendor account list. The sales tax payments then are posted automatically to the settlement account specified in the Ledger posting group. When you select a vendor, the vendor's address is entered automatically. If you leave the field blank, you must pay the tax authorities directly. 5. Select the report layout to print for the tax authority in the Report layout list. Procedure: Create Sales Tax Settlement Periods - Period Interval Follow these steps to set up period intervals for the sales tax settlement periods: 1. Click General ledger, then click Setup, click Sales tax, and then click Sales tax settlement periods. 2. Select the reporting interval in days, months, or years, in the Period interval list, on the General tab. 3. Enter the length of the settlement period in the Number of units field. Based on how you define the Period interval, the settlement period displays in days, months, or years. EXAMPLE: If the Period interval is set to Month(s) and the Number of units is set to 1, a new period automatically is one month. However, if the Period interval is set to Month(s) and the Number of units is set to 12, the length of one period is one year or 12 months. You can create new periods automatically by clicking New periods. 6-18

19 Chapter 6: Sales Tax Setup 4. To create a new period, click on the Periods tab, and then press CTRL+N, or click New period. 5. Enter the first day and last day of a period interval in the From date and To date fields. You cannot change an updated period interval. This means that you cannot remove tax transactions from the original period interval. You can correct errors with an offset transaction that is identical to the original transaction, but with the opposite mathematical sign. Example: Create Sales Tax Settlement Periods In the year 2008, Contoso settles its sales taxes every quarter. To create the first period, enter January 1, 2008 in the From date field and March 31, 2008 in the To date field. To create the other quarters of the year, click New period three additional times. FIGURE 6.6 SALES TAX SETTLEMENT PERIODS FORM CAUTION: The sum of period intervals must cover whole periods so that no tax transactions fall outside the calculation periods. Period intervals may not overlap. Inquire about Sales Tax Settlement Periods When you set up the sales tax settlement periods, you can inquire, report and pay sales tax for specific settlement periods. 6-19

20 Financials I in Microsoft Dynamics AX 2009 The Sales Tax Settlement Periods form contains several methods to inquire on Sales tax transactions: View the sales tax payments for a specific sales tax authority by selecting a sales tax authority on the Overview tab and clicking Sales tax payments. Additionally, view sales tax payments for a specific period by selecting an interval on the Periods tab and clicking Interval sales tax settlements. HINT: Click General ledger > Reports > External > Sales tax payments to print a report about all settled sales taxes. View posted sales tax transactions for a specific sales tax authority by selecting a sales tax authority on the Overview tab and clicking Posted sales tax. This provides an overview of each sales tax transaction, which is posted in Microsoft Dynamics AX 2009 with a sales tax code. Alternatively, click Sales tax per interval to view posted sales tax transactions for a specific interval. Use settlement periods to create and manage the periods the company uses to report sales tax. Test Your Knowledge You use settlement periods to create and manage the periods the company uses to report sales tax. ( ) True ( ) False Sales tax settlement periods specify at what intervals the company reports taxes. ( ) True ( ) False 6-20

21 Chapter 6: Sales Tax Setup Lab Setup of Sales Tax Settlements This lab explains an example of setting up a sales tax settlement period. Scenario Ken, the Controller for Contoso, wants April, the accounts payable coordinator, to pay Contoso's Alabama sales tax liability quarterly. The sales tax authorities expect settlement 15 days after the close of the quarter. The sales tax settlement period and deadlines are laid out in the following table: Settlement period Deadline for reporting January 1 - March 31 April 15 April 1 - June 30 July 15 July 01 - September 30 October 15 October 1 - December 31 January 15, the following year April has asked for your assistance in completing the setup for the Alabama sales tax settlement so that April can generate the tax payments automatically. Challenge Yourself! Set up the required sales tax settlement for Alabama. Need a Little Help? 1. Create the Sales tax settlement period. 2. Attach the Terms of payment to the settlement period. 3. Set up the Period length. 4. Create the individual Settlement periods. Step by Step Set up the Overview tab: 1. On the Navigation Pane, click General ledger, click Setup, click Sales tax, and then click Sales tax settlement periods. 2. Press CTRL+N to insert a line. 3. In the Settlement period field, enter AL. 4. In the Description field, enter Alabama Quarterly. 5. In the Authority field, click the arrow to select ALA-Alabama Authorities. 6. In the Terms of payment field, use the arrow to select N

22 Financials I in Microsoft Dynamics AX 2009 Set up the General tab: 1. Click the General tab. 2. In the Period interval field, use the arrow to select Months. 3. In the Number of units field, enter 3. Set up the Periods tab: 1. Click the Periods tab. 2. Press CTRL+N to add a line, if needed. 3. In the From date field, enter 01/01/ In the To date field, enter 03/31/ Click the New period button three additional times to create the remaining quarters. 6. Close the Sales tax settlement periods form. 6-22

23 Chapter 6: Sales Tax Setup Sales Tax Codes The Sales tax code is a central part of the setup. It specifies: How taxes are calculated The value that is used for tax calculation The sales tax value is very important because no tax is calculated without it. A sales tax code includes information about: How the tax is calculated, posted and reported When the payments are made To whom the payments are made You can define the sales tax rate for: Various intervals and periods in Values Limits on sales tax amounts in Limits Sales Tax Codes - When to Create Create sales tax codes when you initially set up the system. Update the sales tax codes when you need to make changes to existing taxes or when you add new taxes. Because taxes frequently depend on geographic location, changes to the company's market can result in the need for new sales tax codes. NOTE: If a company operates in the United States, it is highly recommended that you set up sales tax jurisdictions, as well as sales tax codes. You must attach sale tax jurisdictions to sales tax groups. You can attach sales tax codes to the sales tax group through the sales tax jurisdictions. 6-23

24 Financials I in Microsoft Dynamics AX 2009 Procedure: Create a Sales Tax Code - Overview Follow these steps to create a sales tax code: FIGURE 6.7 SALES TAX CODES FORM 1. Click General ledger, then click Setup, click Sales tax, then click Sales tax codes, and then click the Overview tab. 2. Press CTRL+N to create a line for the new sales tax code. 3. Enter a unique identifier for the sales tax code in the Sales tax code field. This is the basis for calculation of tax, purchase duty, and packing duty throughout Microsoft Dynamics AX Enter a meaningful name for the new sales tax code in the Name field. This describes the function of the code and appears on reports and throughout the Microsoft Dynamics AX 2009 system. NOTE: If a company operates in the United States, set up sales tax jurisdictions in the Sales tax jurisdiction list. 5. Select the period and the sales tax authority used to calculate the sales tax code in the Settlement period list. 6. Select ledger posting group for a sales tax code in the Ledger posting group list. The posting group contains information about which accounts to use when the sales tax amounts automatically are posted in the General Ledger. You can create the posting groups in the Ledger posting groups form. 6-24

25 Chapter 6: Sales Tax Setup Procedure: Create a Sales Tax Code - Calculation options Follow these steps to set up calculation options when you create a sales tax code: 1. Click General ledger, then click Setup, click Sales tax, then click Sales tax codes, and then click the Overview tab. 2. Select from the following options in the Origin list: o Percentage of net amount - Percentage of purchase or sale, excluding any other taxes. o Percentage of gross amount - Percentage of purchase or sale, including any other taxes. Sales tax calculates as a percentage of the purchase or sale amount. This includes all other taxes or duties. o Percentage of sales tax - Percentage of another tax. The tax code that this calculation is based on must exist in the system. On the Calculation tab, set up the specific sales tax code that you based the current sales tax code on, in the Sales on sales tax field. CAUTION: If the Sales on sales tax field is blank, this indicates that the amounts include all other taxes. o Amount per unit - Indicate the unit with a Unit. If the transaction is in another unit, it converts automatically based on Unit conversion in Inventory. Calculated percentage of the net amount. On the Calculation tab in the Unit list, select the unit to use when taxes are calculated. If the transaction is expressed in another unit, it converts automatically according to the Unit conversion. NOTE: If the basis for tax is the number of units, this Unit field is mandatory. Procedure: Create a Sales Tax Code - Additional Calculation Options Follow these steps to set up additional calculation options when you create a sales tax code: 1. Click General ledger, then click Setup, click Sales tax, then click Sales tax codes, and then click the Calculation tab. 2. Click the Values button. Enter the Percentage/Amount in the Values form. Click Values to set up the sales tax rate. Also refer to the procedure on how to create sales tax codes intervals. Close the Values form. 6-25

26 Financials I in Microsoft Dynamics AX Click the General tab. Select the currency in which tax must be calculated in the Sales tax code form on the General tab in the Currency list. If the original transaction is in another currency, the tax converts automatically. NOTE: Also set up a purchase duty on a sales tax code by selecting the Purchase duty check box. Users typically use the purchase duty if, for example, a European company imports goods from a non-european company. Set up the purchase duty in the General ledger > Setup > Posting > Purchase duty form. 4. Select whether a code or the sales tax rate should print with the sales tax specifications in invoice documents by making a selection in the Print field on the General tab. 5. Define an identifier that specifies the sales tax code on printed invoices in the Print code field, but only if Print code is selected in the Print list. The sales tax code identifier is an alphanumeric string that may include special characters. Procedure: Create a Sales Tax Code- Rounding and Report Setup Follow these steps to set up rounding and reports when you create a sales tax code: 1. Click General ledger, then click Setup, click Sales tax, then click Sales tax codes, and then click the Calculation tab. 2. Enter the lowest absolute value of a calculated tax on the Calculation tab in the Round-off field. For example, if taxes should round off to a unit that is 1/100 of the currency of the tax, enter the value as a decimal (0.01). The Rounding form field indicates the kind of rounding to use. Refer to the following table for rounding on the amount $98, with different rounding values set up. Round-off = 0.01 Round-off = 0.10 Round-off = 1.00 Round-off = , , , , Click the Report setup or Report setup - credit note tab. 4. Insert the Reporting code numbers to facilitate reporting on the Report setup and Report setup - credit note tab pages. Frequently the tax authorities have special forms with numbered cells for reporting of taxes. For example, in the Taxable sales list, you can select the number of the field in the tax report that contains taxable sales. A series of forms exists within Microsoft Dynamics AX 2009, which contains numbered cells that you can report to various authorities. The sales tax code is included in these reports in the cell indicated in this field. 6-26

27 Chapter 6: Sales Tax Setup Rounding and Report Setup Notes NOTE: Click General ledger > Reports > Base data > Sales tax codes to print a report listing all the sales tax codes. NOTE: In the Parameters form (click General ledger, click Setup, click Parameters, and then click the Sales tax tab), select the Calculation date type to determine the date that sales tax calculates. In the Method of calculation list, select whether the sales tax should calculate for each line or the total amount. Example Setup- Calculation Methods for Sales Tax Codes Here is an example that shows a sample setup for sales tax codes: Scenario: Phyllis is the Accounting Manager at Contoso. Contoso's customer base includes many international customers. To increase the understanding of sales tax, Phyllis is asking your assistance in reviewing the calculation of sales tax by using various options available in Microsoft Dynamics AX The following table shows Phyllis's review of setups in Contoso: Setup 1 - Use percentage of amount Setup 2 - Use percentage of sales tax Rate Duty 1 Percentage of net amount Percentage of net amount 10% Duty 2 Percentage of net amount Percentage of sales tax (Duty 1 in the sales tax on sales tax list) 20% Sales Tax Calculation Percentage of gross amount Percentage of gross amount 25% 6-27

28 Financials I in Microsoft Dynamics AX 2009 Example Setup- Calculation Methods for Sales Tax Codes- Incomplete Table How would you apply the information in the table above to determine the effect of each setup on an invoice for USD by completing the following table with the provided information? Setup 1 Setup 2 Rate Formula Calculation Formula Calculation Duty 1 10% Duty 2 20% Gross Amount Sales Tax 25% Calculation Duty + Sales Tax Total Sale The completed table will be shown in the next lesson section. Example Setup- Calculation Methods for Sales Tax Codes- Completed Table The completed table as shown here: Setup 1 Setup 2 Rate Formula Calculation Formula Calculation Duty 1 10% $10 * 10% Duty 2 20% $10 * 20% Gross Amount $1.00 $10 * 10% $2.00 ($10+1) *20% $ $13.00 $ $1.00 $2.20 $13.20 Sales Tax Calculation 25% $13 * 25% $ 3.25 $13.20 * 25% $ 3.30 Duty + Sales Tax $ $ 6.25 $ $ 6.50 Total Sale $ $16.25 $ $

29 Chapter 6: Sales Tax Setup Test Your Knowledge Sales Tax Codes Intervals A sales tax code includes information about which of the following? (Select all that apply.) ( ) When the payments are made ( ) How the tax is posted ( ) How the tax is calculated ( ) The currency in which the sales tax is calculated Use Microsoft Dynamics AX 2009 to specify: The sales tax rates to use in different intervals A lower and upper amount limit for sales tax calculations Sales taxes lower than the minimum limit amount are not recorded, and sales taxes over the upper limit amount are set to the upper limit amount automatically. You can attach the limits to specific dates. The sales tax code defines the limits. Changes to minimum and upper limits do not affect sales tax that is already updated and posted. Procedure: Create Sales Tax Codes Intervals - Effective Dates Follow these steps to set up the From date and To date field in sales tax code intervals, both Limits and Values: FIGURE 6.8 SALES TAX VALUES FORM 6-29

30 Financials I in Microsoft Dynamics AX Click General ledger, then click Setup, then click Sales tax, then click Sales tax codes, and then click Limits OR click General ledger, then click Setup, then click Sales tax, then click Sales tax codes, and then click Values. 2. Enter the first date the tax limits apply in the From date field. NOTE: The previous limits are visible because they are not overwritten when users make changes. 3. Enter the last date the tax limits apply in the To date field. 4. With From date and To date fields, indicate a period that the calculated tax applies to. The posting date determines when the tax falls outside the given period. If you have made changes to the limits, close the old period to indicate an ending date in the To date field and create a period with a new starting date in the From date field. Extend the old period by changing the date in the To date field. You can change the limits taking effect at a later date. Procedure: Create Sales Tax Codes Intervals - Minimums and Maximums Follow these steps to set up the minimums and maximums in sales tax code intervals in the Limits form: 1. Enter the lower sales tax limit in the Minimum sales tax field. If the tax is lower than this minimum amount, it is reduced to zero automatically. The amount in this field must be the same currency as the currency specified in the sales tax code. 2. Enter the upper sales tax limit in the Maximum sales tax field. If the tax is more than the amount indicated, it is adjusted automatically to match this amount. The amount in this field must be the same currency as the currency specified in the sales tax code. Follow these steps to set up the field in the Values form: 1. In the Values form, specify a sales tax rate for the different intervals. 2. In the Value field, define the tax percentage, or amount for each unit. If the basis for the calculation of tax is an amount, the entry in the Value field on the Overview tab of the Values form is the percentage value used in the calculation. 3. If the basis is several units, such as Purchase duty or Packing duty, the entry in the Value field on the Overview tab of the Values form is the amount for each unit used in the calculation. You can define units by using the Unit field found on the Calculation tab on the Sales tax codes form. 6-30

31 Chapter 6: Sales Tax Setup Sales Tax Code Intervals- Values Versus Limits For a sales tax code, Values define the tax to calculate, on either a percentage or amount per unit, based upon the effective interval dates and the minimum and upper limits. These minimum and upper limits are the minimum and upper sales amount to which the amount entered in the Value field applies. For a sales tax code, Limits define the tax to calculate, based upon the effective interval dates and the minimum and maximum sales tax. These minimum and maximum sales tax limits are the minimum and maximum sales tax that will be calculated on the sale, after all tax calculations are performed. Procedure: Create Sales Tax Codes Intervals - Marginal Base Options Follow these steps to set up the marginal base options in sales tax code intervals: 1. In the Sales tax code form on the Calculation tab, select the origin for the sales tax limits in the Marginal base list. 2. Select from the following options: o Net amount per line - Value of the line, excluding any other taxes. o Net amount per unit - Value of the unit, excluding any other taxes. This can involve the unit price specified by using a unit in the Unit field. o Net amount of invoice balance - The total value for the invoice, excluding any other taxes. o Gross amount per line - Value of the line. This includes any other taxes. You can include only one tax code with this or the next property in the individual calculation. o Gross amount per unit - Value of the unit. This includes any other taxes. You can include only one tax code with this or the previous property in the individual calculation. o Invoice total incl. other sales tax amounts - The total value for the invoice. This includes any other taxes. You can include only one tax code with this property in the individual calculation. 6-31

32 Financials I in Microsoft Dynamics AX 2009 Procedure: Create Sales Tax Codes Intervals - Method of Calculation Follow these steps to set up the method of calculation in sales tax code intervals: 1. Select the origin for the sales tax limits in the Method of calculation, in the Sales tax code form on the Calculation tab. 2. Select from the following options: o Whole amount - The sales tax calculates for the whole amount, which the tax rate for the interval that includes the transaction determines. o Interval - The base is divided into intervals. The part within a given interval is calculated automatically based on the tax rate for that interval. NOTE: Click the Inquiries button > Included in sales tax groups or Included in item sales tax groups to view or attach sales tax codes to sales tax groups or item sales tax groups. Click the Inquiries button > Posted sales tax to display posted sales tax transactions for a sales tax code and an itemization of each tax. Use this function for inquiries and error detection. In the Sales tax transactions form, click Voucher to view related ledger transactions. 6-32

33 Chapter 6: Sales Tax Setup Test Your Knowledge Sales taxes over the minimum limit amount automatically are discontinued and sales taxes under the upper limit amount are set to the upper limit amount. ( ) True ( ) False Task: Specify the origin for the sales tax limits in the Marginal base list. Match the options to the answers. 1. Net amount for each line 2. Net amount for each unit 3. Net amount of invoice balance 4. Gross amount for each line 5. Gross amount for each unit 6. Invoice total incl. other sales tax amounts a. Value of the unit, including any other taxes b. The total value for the invoice, excluding any other taxes c. Value of the unit, excluding any other taxes d. The total value for the invoice, including any other taxes e. Value of the line, excluding any other taxes f. Value of the line, including any other taxes 6-33

34 Financials I in Microsoft Dynamics AX 2009 Lab Set Up Sales Tax Codes Intervals This lab provides practice in setting up sales tax code intervals. Scenario Ken, the Controller for Contoso, has received a notification from the State of Florida that as of 07/01/2008, a tiered tax is due on video recorder sales. Ken asks for your assistance in setting up tax codes that comply with the new structure. The notice specifies the following rates: Minimum limit Maximum limit Tax rate % % % Challenge Yourself! Use sales tax code intervals to structure the AV_FLST tax rate in Microsoft Dynamics AX 2009 for the new rates. Microsoft Dynamics AX 2009 will require an ending date for the tax. Plan to enter an artificial date of 12/31/2020. Need a Little Help? 1. Before you add a new line to the Values form, you must enter dates on the existing line. Suggested dates are 1/01/2003-6/30/ Add the lines to the Values form. All of them will be assigned the same date range assigned. Step by Step Edit the LA-FLST line: 1. On the Navigation Pane, click General ledger, then click Setup, then click Sales tax, and then click Sales tax codes. 2. Locate the line for AV_FLST. 3. Click the Values button. Edit the existing line by adding dates: 1. In the From date field, enter 01/01/ In the To date field, enter 06/30/ Press CTRL+N to add a line. 6-34

35 Chapter 6: Sales Tax Setup 4. In the From date field, enter 07/01/ In the To date field, enter 12/31/ In the Minimum limit field, enter In the Upper limit field, enter In the Value field, enter Create the rest of the lines: 1. Press CTRL+N to add a line. 2. Repeat steps 1 through 8 to add the remaining tax intervals to the form. 3. Close the Values form. 4. Close the Sales tax codes form. 6-35

36 Financials I in Microsoft Dynamics AX 2009 Sales Tax Groups A sales tax group includes all sales tax codes that apply when you trade goods or services with customers and vendors. In most countries, different tax rules apply when you trade with domestic and foreign customers. The tax rules for foreign trade frequently are split up based on bilateral and multilateral trade agreements. Therefore, you must create tax groups depending on the taxes that may apply for a certain group of customers or vendors. A careful analysis of the different types of customers and vendors that the company trades with is a good starting point for determining the types of Sales tax groups needed, and the setup of those Sales tax groups. Sales Tax Groups - Example Comparison If your company needs the following tax codes, here is an example of how to apply sales tax codes to a sales tax group: VAT (only applies for domestic customers) Export Tax (only applies for foreign customers) Environmental duty (applies to all customers) In a table, they appear as follows: Domestic customers Foreign customers VAT Yes No Export Tax No Yes Environmental Duty Yes The two groups of customers (domestic and foreign) do not have identical tax needs. Therefore, you must create two different sales tax groups that reflect the differences: Yes Foreign customers: this group would contain the Export Tax and Environmental Duty tax codes Domestic customers: this group would contain the VAT and Environmental Duty tax codes After you create the sales tax groups, attach the appropriate sales tax group to: Customers Vendors Ledger accounts 6-36

37 Chapter 6: Sales Tax Setup Procedure: Create a Sales Tax Group Follow these steps to create a sales tax group: FIGURE 6.9 SALES TAX GROUP FORM Because the geographic location of the customer or the supplier determines taxes, you usually assign the same Sales tax group to similar trading partners in the system. The correct tax codes used by the system are attached to this Sales tax group. The Sales tax group then associates with customer information specified in the Sales tax group field found on the Setup tab in the Customers form. 1. Click General ledger, then click Setup, then click Sales tax, then click Sales tax groups, and then click the Setup tab. 2. Enter a unique name for the sales tax group in the Sales tax group field. 3. Enter a name that identifies the sales tax group in the Description field. 4. Select Sales tax code in the Sales tax group setup list. If the company is located in a country with sales tax jurisdiction, select the Sales tax jurisdictions value. NOTE: If the Sales tax jurisdictions value is selected in the Sales tax group setup list, a new tab called Jurisdictions setup appears. 5. Select the rounding criteria for the sales tax group in the Rounding by list. 6-37

38 Financials I in Microsoft Dynamics AX 2009 Rounding By- Additional Information The following is additional information on the choices available in the Rounding by field on the Sales tax group form. The Rounding by field controls the rounding principle that applies to the taxes of the sales tax group. This field is available if your company configuration includes sales tax jurisdictions. The two kinds of rounding that you can select that apply to the sales tax group are: Sales tax codes Rounding is according to the sales tax code roundoff. You can see the value in the Round-off field on the Calculation tab of the Sales tax codes form. Sales tax code combinations - Rounding is according to the sales tax code combination that is attached to each invoice line. Procedure: Create a Sales Tax Group - Additional Fields Follow these steps to set up additional fields in Sales tax groups: 1. Click General ledger, then click Setup, then click Sales tax, then click Sales tax groups, and then click the Setup tab. 2. Enter a form of identification to identify a sales tax group based on specific criteria, such as country, state, or county, in the Country/State and County/Purpose fields. This provides another method to identify the group. 3. Select the Reverse sales tax on cash discount check box to reverse sales tax on a cash discount on the General tab. States in the United States have different requirements, so you must set up this information on the sales tax group. When you create a sales tax group, the selection in the Reverse sales tax on cash discount field in Parameters defaults to the field. 4. Select one or more sales tax codes to use with the sales tax group on the Setup tab. The fields on the Setup tab automatically fill in with values from the Sales tax codes form. 6-38