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gptip42day - How Sales Taxes are Calculated in GP

Thu, 17 Jun 2010 05:08:32 GMT

As a follow-on to last week's article on Shipping Methods and Types, here, explained in excruciating detail, is GP sales tax calculation logic.

When the system calculates tax on a sale or purchase transaction, it compares the tax schedule assigned to the customer or vendor, as well as the tax schedule assigned to the sale or purchase transaction and any freight and miscellaneous charges. The system checks for details that match between the customer or vendor and the sale or purchase amounts. Taxes are calculated only for the details that match.

If you change the Shipping Method for a transaction, taxes are automatically recalculated. When the Shipping Method is Pickup, the tax schedule for the vendor is compared to the tax schedules for the items. When the Shipping Method is Delivery, the tax schedule for the customer is compared to the tax schedules for the items.

Example - Different Tax Rates for Different Items

A retail store is selling three items to a customer -

- A shirt at US$20.00

- A portable radio at US$50.00

- A liter of milk at US$1.00

The store is located in a town that is subject to 1% city tax and a 5% state tax. However, clothing and food are not taxable in either jurisdiction. Because the customer is purchasing the items at a retail store, the exchange of goods happens in the store's jurisdiction, not the customer's. To calculate the taxes, GP compares the tax schedules that are assigned to each item with the tax schedules assigned to the store and calculates taxes only for the details that match for both.

Example - Different Tax Rates for Different Customers

A mail-order distributor is selling three items to a customer -

- A shirt at US$20.00

- A portable radio at US$50.00

- A box of chocolates at US$10.00

The distributor is located in a town that is subject to 1% city tax and a 5% state tax. The customer is located in another town, where no city taxes apply. Clothing and food are not taxable in either jurisdiction. Because the items are being shipped to the customer, the exchange of goods happens in the customer’s jurisdiction, not the distributor’s. To calculate the taxes, GP compares the tax schedules that are assigned to each item with the tax schedule assigned to the customer and calculates taxes only for the details that match for both.

If you’ve marked the 'Use Shipping Method when Selecting Default Tax Schedule' option in the Company Setup Options window, GP uses the Shipping Method assigned to the transaction to determine where the exchange of goods takes place, and provides the appropriate tax schedule as a default schedule for the transaction.

Why my taxes not being automatically calculated in Dynamics GP?

Fri, 23 Jul 2010 11:00:24 GMT

A question came up to the Microsoft Dynamics Forums asks about the tax schedules and why it does not automatically calculated while the tax schedules are already defined and correctly linked to items, customers, vendors and sites.

There is an option in Microsoft Dynamics GP to calculate the tax based on the shipment method, this is normally unused in our region but it still being defaulted in company setup, so if you been in a situation that your taxes are correctly defined but the system does not calculate it, make sure that you go to “Microsoft Dynamics GP menu >> Tools >> Setup >> Company >> Company >> Options” and unmark “Use Shipping Method when Selecting Default Tax Schedule”.

Regards,
--
Mohammad R. Daoud - CTO
MVP, MCP, MCBMSP, MCTS, MCBMSS
+962 - 79 - 999 65 85
mohdaoud@gmail.com
mohdaoud.blogspot.com

Sales Tax Simplified

Thu, 17 Jun 2010 18:15:02 GMT

Sales Tax Simplified Part 2

Thu, 17 Jun 2010 18:15:02 GMT

gptip42day - Tax Details vs. Tax Schedules - It Taxes My Mind

Thu, 17 Jun 2010 05:09:15 GMT

This topic can be a user confuser so let's make it simple. For example, here in the Sunshine State (FL), the state sales tax is 6%. Most counties and some municipalities also impose a local sales tax. These two components of sales tax are each considered a 'Tax Detail' in GP-speak. The combination of two or more tax details is called a 'Tax Schedule'. The importance of Tax Details and Tax Schedules comes down to accurate, detailed reporting to the taxing authorities.

Tools>Setup>Company>Tax Details

* click image to enlarge

When setting up Tax Details, some users mistakenly lump multiple components of the total tax into one Tax Detail. This is all well and good - the correct tax amount is calculated on a sales invoice. But when it comes time to report state and local tax to the taxing authorities, how do you breakout the state vs. local tax? That's where the Tax Schedule comes in handy.

Tools>Setup>Company>Tax Schedules

* click image to enlarge

Setting the multiple tax components in a Tax Schedule allows for accurate calculation and reporting of taxes to the respective taxing authorities. Just set all your Tax Details first, then in the Tax Schedules window, mix and match the Tax Details to create all the Schedules you need to correctly assess sales tax on your customer invoices. Then go into your Customer Cards and set the correct Tax Schedule for each customer. The result will be automatic tax calculation of the correct rate(s) on Sales Invoices and the ability to report accurately to the taxing authorities.

Note: Tax Details are setup separately for Sales and Purchases. Make sure when setting sales tax details for customers and vendors that you make the correct selection in the 'Type' field.

Monday, we'll look at how the 'Shipping Method' affects sales tax calculation. Have a great weekend all!

Mark Polino on Use Tax and Microsoft Dynamics GP

Thu, 17 Jun 2010 18:12:57 GMT

Use tax is one of those things that many companies using Microsoft Dynamics GP immediately resort to third-party solutions without really considering the systems out-of-the-box capabilities. The reasons may be various, among them, a lack of awareness of the GP's capabilities to begin with.

I had the opportunity to actively participate in the review of a document on Use Tax written by fellow Dynamics GP MVP, Mark Polino. In his document, Mark extensively covers the methods for configuring, tracking, and accounting for use tax in Microsoft Dynamics GP.

Please make sure you download and read Mark's document as he has dedicated a significant amount of time working through the techniques and methods with GP out of the box functionality.

Until next post!

MG.-
Mariano Gomez, MVP
Maximum Global Business, LLC
http://www.maximumglobalbusiness.com

Sales Taxes, Not so Difficult

Thu, 17 Jun 2010 02:08:22 GMT

Most Dynamics GP users I talk with, complain about the sales tax functionality. They say it's difficult to set up and maintain. I don't necessarily agree.

I just updated the new tax rates effective in California as of July 1, 2009. Because I had setup the taxes using Tax Schedules that contain individual Tax Details to represent the different taxing agencies, all I had to do was update the Tax Details that changed. In my case, the one Tax Detail that changed was Los Angeles County. Once I changed the one Tax Detail, it will effect all Tax Schedules that include that Tax Detail; perhaps six.

The task was simplified because the CA Board of Equalization publishes a list of tax rates. There are maybe 130 different taxes on this. An added bonus; this report includes four character codes that can be used for the Tax Detail ID.

When I set up sales tax in GP, I start with the tax return that needs to be filed on a periodic basis, and figure out how much detail I will need to assist in reporting. I then identify the different tax details that need to be created, and then create the Tax Schedules to contain the details. The set up takes some time, but keeping the rates up to date; not so difficult.

I agree that if you have more than a few states, this can become overwhelming. For those cases, use a service like AvaTax or CCH.

gptip42day - Clarifying 'Shipping Method' in Sales Tax Calculations

Thu, 17 Jun 2010 05:08:33 GMT

When calculating sales tax on either sales transactions or purchase transactions, GP relies on the Shipping Method to determine the sales tax rate applied to the transaction. Key to determining the tax rate used is the Shipping Type selected in Shipping Methods Setup.

Tools>Setup>Company>Shipping Methods

* click image to enlarge

Note the Shipping Type. If Delivery is selected as the Shipping Type, then the tax rate used is that of the destination. If Pickup is selected as the Shipping Type, then the rate used is that of the shipping point. The logic behind this is based on the UCC (Uniform Commercial Code) which says that the point at which legal title to goods transfers, is the point at which taxation is determined. So, if the goods are shipped to your customer, they pay sales tax based on their local rates. If your customer picks up the goods at your facility, they pay sales tax based on your local rates. The same applies for purchases you make.

There's a lot more detail behind how GP matches the Shipping Method and Tax Schedules in the Customer or Vendor card with the Tax Schedule in the Item card. Hopefully though, this provides some clarification as to why it's so important, from a sales tax perspective, to make sure the correct Shipping Methods and Tax Schedules are setup in your Customer and Vendor cards.

Shipping Methods and Sales Tax Calculations

Wed, 16 Jun 2010 20:13:30 GMT

Frank has another great article about the effect of Shipping Method on the sales tax calculations, checkout his post here.

Regards,
--
Mohammad R. Daoud
MVP, MCP, MCBMSP, MCTS, MCBMSS
Software Development Manager
+962 - 79 - 999 65 85
Great Package For Business Solutions
daoudm@greatpbs.com
http://www.greatpbs.com

Sales Tax Calculation in GP - gpTip42Day

Thu, 17 Jun 2010 03:11:59 GMT

This one is very simple yet powerful illustration, on How GP calculates Sales Taxes, from Frank Hamelly on his gpTip42Day.

I am writing an Pointer Article to this inspite of adding gpTip42Day as a Side Bar Link, as this article taught me the actual calculation behind Sales Taxes. I usually assume from the way the amounts are arrived at, but I had never known about the theory behind it.

Must read.

VAIDY

Dynamics GP Use Tax

Mon, 21 Jun 2010 18:10:37 GMT

My new Complete Guide to Use Tax in Dynamics GP 10 is now available over at DynamicsCare. In it I take an exhaustive look at the out of the box options for dealing with Use Tax in Dynamics GP 10.

If you've got use tax needs, this is a good place to start your research to decide if GP's native functionality is sufficient for you or if you need a third party option.

Tax Details, Tax Schedules, Taxing Your Patience

Thu, 17 Jun 2010 20:07:55 GMT

Frank Hamelly takes on Tax Details and Tax Schedules in today's update. Tax your brain for a few minutes today and then you can take the weekend off.

More Simplified Sales Tax

Thu, 17 Jun 2010 20:07:55 GMT

Up now at Dynamics GP Land, Christina Phillips shares more about Sales Tax in Microsoft Dynamics GP.

Modify Sales Tax Schedule Report

Thu, 17 Jun 2010 02:08:47 GMT

I had the honor of updating the sales tax rates in our GP system following the 4/1/09 changes in CA. The existing Tax Schedule report was not useful to me because I had set up the sales tax function in GP to make good use of the Tax Details; so that a typical tax schedule will have 3 - 5 tax details in it. I quickly modified the report to show the tax percentages and to add them up by Tax Schedule.

To print the report navigate: Reports >> Company >> Taxes
Select "Tax Schedule" for the report type.

I made three modifications:

Add the Tax Detail Percent field from the Sales/Purchases Tax Master table, to the body of the report. You'll want to make some room for it.

Add a footer with Report Section Options, using the Sales/Purchases Tax Schedule Header table, and the Tax Schedule ID field.

Add the Tax Detail Percent field from the Sales/Purchases Tax Master table, to the new footer. Change the Display Type to "Sum".

And that's it. This gave me the basic information I needed to ensure that I had set up the tax schedules correctly. It took me less than ten minutes to get the basic report.

You may want to make it look a little better by adding labels and formatting the total amount.

This is what mine looks like:

Weekly Dynamic: Tax Date on Transactions

Thu, 17 Jun 2010 20:07:58 GMT

Another nice feature that is NOT enabled by default is the ability to add a tax date to a transaction. Perhaps the nature of the transaction is that the sales tax actually belongs in the previous or next period. Wouldn't it be nice to specify a tax date instead of having to rely on the transaction date? Well you can.

In Company Setup Options (Tools->Setup->Company->Company, Options) there is check box marked "Enable Tax Date". Simply select this and hit ok.

Now a tax date field is enabled in Sales, Purchasing and other parts of the system. Attached is a sample of what the tax date looks like on a Sales Transaction.

Dynamics GP and Taxes

Mon, 21 Jun 2010 18:11:00 GMT

My new article is up at MSDynamicsWorld.com. In these tough economic times I decided to take a look at how to use Dynamics GP to make sure that taxes don't sneak up and bite you. After all, that's one bill you will always have to pay.

Code to display tax schedules

Tue, 20 Jul 2010 15:00:52 GMT

I recently had to do some work against tax schedules at a client, I needed to quickly see the tax schedules. Here is code to display the tax rate for one tax schedule, and for all of them.

The result will look something like this:

To get one tax schedule, I wrote a function:

 -- =============================================
-- Written by 4Penny.net
-- 941-747-3669
-- =============================================
IF EXISTS (SELECT * 
    FROM   sysobjects 
    WHERE  name = N'f_4P_taxAmount')
 DROP FUNCTION f_4P_taxAmount
GO
CREATE FUNCTION f_4P_taxAmount ( @taxschid varchar(15))
--  select ngb01.dbo.f_4P_taxAmount('dekalb')
Returns money
AS
begin
 declare @out money
 set @out = 0
 
 select @out = sum(tx00201.txdtlpct)
  from tx00102 with (nolock)
   left join tx00201 with (nolock) on tx00201.taxdtlid = tx00102.taxdtlid 
  where taxschid = @taxschid
 return (@out)
end
go
grant all on f_4P_taxAmount to public

Then we can call the function from a query to get all the tax schedules:

select t.taxschid, t.txschdsc, dbo.f_4P_taxAmount(t.taxschid)
 from tx00101 t (nolock)
 order by t.taxschid

Setting a Tax Class on a Product

Thu, 17 Jun 2010 18:14:33 GMT

1. Select the Product Manager from the Products drop down.

2. Expand the first Occasion.

3. Expand the products inside the occasion.

4. Select the first product.

5. Change the Tax Class to "Goods"

6. Save the change by clicking "Update"

7. Check the other products to verify that they are set to "Goods" as well.

Why are taxes not being automatically calculated in Dynamics GP?

Fri, 23 Jul 2010 23:01:12 GMT

The tax settings in Dynamics GP have lots of factors that can affect the way taxes are calculated. Mohammad Daoud looks at one scenario in Why my taxes not being automatically calculated in Dynamics GP?

All Change on 15% Tax Again January 2010

Thu, 17 Jun 2010 18:07:06 GMT

Tax Changes in Dynamics (GP)

This is a quick re working of the advice we put together last time the VAT changed from 17.5 to 15%. This change is being reversed in January 2010 so now would be a good time to start thinking about how this might effect your systems. The changes in VAT where originally set out in the Chancellors PBR on the 24th November 2008. Because of the nature of Tax calculations in Dynamics (GP) this article is intended purely as a Guide and you will need to choose the appropriate actions for your circumstances.

Note: We have kept these notes fairly generic as we have clients on several different versions, however in version 10 where we give a path to Setup>company etc these are found under Tools> setup > Company

Tax Details

Originally we advised that everyone will need to set up a new set of tax details to replace the 17.5% details currently used. We recommended that you did not simply change the rate on your existing detail as this could cause you reporting problems and issues when trying to post back.

To set up a new Tax detail you need to go to Setup>Company>Tax details
You needed to set up a minimum of two details, one for sales and one for purchasing. This needed to be done in each of your companies.

If you followed this advice you should now still have your original 17.5% tax codes to which you can now revert in January.

Tax Schedule

Here you have Two choices.

Option 1: We advised that you could retain the existing Tax schedule and simply remove the 17.5% detail from this schedule. Then add the new 15% detail to the schedule and to the ALL Sales and ALL purchasing schedules that you have setup on the company. Schedules can be accessed from setup>Company>Tax Schedules. This has the advantage of not then needing to change any setup on classes , debtors, creditors , items or projects. Simply put where ever the old 17.5% detail appears in a schedule on its own (No other details)you will need to replace it with the 15% detail and wherever it appears with other details you will need to add in the 15% detail. If you took this option then it is simply a matter of swapping the details back.

Option 2: is to setup two new Tax schedule (one sales one purchasing). Again this is done through setup>company>Tax schedules. Once these have been crested you will also need to add the 15% Tax detail to the existing All sales and All Purchasing tax schedules. However if you create a new schedule you will need to change all the card records within dynamics that have a schedule attached. These are Debtor maintenance, Creditor Maintenance, Item maintenance, Cards project categories, SOP setup options default tax schedules , and the appropriate Classes for all of the above , this will also need to be done in each company. If you took this option then you will need re allocate the ols schedules to classes etc and role down the changes.

VAT Reporting and Vat input and Output codes

Originally we advised, If you are using the standard Vat reporting within Dynamics (GP) this all works off of Tax detail ID so if you have created a new detail there should be no issues. However some of our clients are reporting directly off of the GL account code. If this is the case you will need to setup two new GL accounts for the new tax rate (input and output accounts)and add these accounts into the new details you have created.
Setup new accounts under cards >Financial>Accounts remember it will need to be a balance sheet account.
The Account can be associated with the Tax detail Setup>Company>Tax detail id.
You may wish to do this even if not reporting directly of the GL. If you followed these instructions you will need to change the account code back.

Sales Order Processing

SOP will cause some issues as any outstanding transactions created this week will retain their 15% tax detail when transferred to invoice (This is not a problem for POP as this recalculates). The Tax setup options for SOP are on the options Tab of the Sales Order setup window found under Setup>Sales> Sales order processing. To get round this issue you will need to go back and change the tax on the order to the new rate before transferring to invoice.

Nolan’s Advanced VAT

We have spoken to Nolan’s and they are issuing no specific advise however like us they are advising to create new details rather than update existing ones. These are found in the same place as the standard Tax details as these are alternate windows.
Note: if using Nolan’s advanced VAT you can set an account to be Taxable, in which case a tax schedule is held against the account as well as an individual Tax ID , these will need to be changed as well where they are using the 15% tax detail. These are accessed under cards>financial>Account .

Project Accounting

Depending on how your projects are setup , you may need to change the tax schedules on Cards> Projects> cost category.

Further Advice from the Government

For further detailed information and HMRC guidance about the original change, please visit the HMRC Website at http://www.hmrc.gov.uk/pbr2008/

Advice has yet to be issued on the upcoming change in January 2010

No advice has been issued by Microsoft at this time , but when they do we will update you.

If you have any questions please contact the helpdesk@touchstone.co.uk