Tax Authorities Screen

Expense accounts are accounts to which the program posts amounts charged against your bank account for interest on loans, penalties on returned checks, bank service charges, and other expenses that are reported on your bank statements.

You can set up one or more expense accounts for each bank account, or use the same expense account for all bank accounts.

If you select the Expense Separately option, you must enter an expense account.

Do not select an account with the Post To Account field set as prohibited.

A description of the specified expense account field will display in the Expense Account Description field.

Select this option if you record tax as an expense, and then specify the general ledger account to which expensed tax is posted. If you select this option, you must enter an expense account.

Example: Assume your company purchases a $100 inventory item at 7% federal tax: if you expense the tax separately, the $7 tax is debited to the expense account.

Do not select an account with the Post To Account field set as prohibited.

If you select the Tax Recoverable option, enter the recoverable tax rate as a percentage, using up to five decimal places. The default rate is 100.00000.

If you enter a rate less than 100%, you can expense the unrecoverable portion using the Expense Separately option, or you can include it in the cost of the item purchased.

If you select the Tax Recoverable option, specify the number of the general ledger account to which recoverable tax amounts paid are posted. You cannot leave the account blank.

Do not select an account with the Post To Account field set as prohibited.

A description of the specified account will display in the Recoverable Tax Account Description field.

Specify the number of the general ledger account to which amounts calculated as sales taxes by your company for this authority are posted.

The amount your company must remit is the total sales tax calculated for the authority in all the tax groups. Any subledger that calculates sales tax uses this account. You cannot leave it blank.

Do not select an account with the Post To Account field set as prohibited.

A description of the specified account will display in the Tax Liability Account Description field.

Select this option if the tax your company pays on purchases is recoverable from the tax authority.

Example: If you pay a goods and services tax on the purchase of wholesale items, you may be able to recover the tax from the government.

If you select this option, you must enter the recoverable rate and the recoverable tax account.

Select this option if taxes charged by an authority can be included in the selling price.

Whether or not tax is included in the price depends on the Tax Included option selected for each item in Accounts Receivable or Inventory Control.

Whether tax is included in the base used to calculate discounts depends on the terms applied to a particular invoice. Terms are defined for customers in Accounts Receivable and for vendors in Accounts Payable.

Note: Do not select this option if you have customers who are tax exempt, because tax is not extracted from the item price. For these customers, you must adjust the price.

Displays the date that the record was most recently changed.

This field is updated with the session date automatically when you add a new tax authority, tax group, or tax rate, and when you change an existing record.

Enter the limit on the tax charged on an invoice by a tax authority. If there is no limit, accept the default amount. The amount displayed is in the reporting currency.

During tax calculations in Accounts Receivable, Accounts Payable, Order Entry, and Purchase Orders, the maximum tax allowable is compared to the tax amount converted to the reporting currency. If the converted tax amount is greater than the maximum tax amount allowed, the maximum amount specified will be used as the tax amount for the reporting currency.

Note: This field is available only if you select No Reporting on the Report Tax on Retainage Document list.

Enter the minimum tax amount charged by a tax authority. If there is no minimum, accept the default amount (all zeros). The amount displayed is in the reporting currency.

During tax calculations in Accounts Receivable, Accounts Payable, Order Entry, and Purchase Orders, the minimum tax will be compared to the tax amount converted to the reporting currency. If the converted tax amount is less than the minimum tax, no tax is charged.

Note: This field is available only if you select No Reporting on the Report Tax on Retainage Document list.

Specify whether to keep tax audit information for this authority:

• At Invoice Level. Tax information is printed at the invoice level on the Tax Tracking report. You can clear the tax information after printing if you print to a printer or file.
• No Reporting. Tax audit information is not kept, and the Tax Tracking report is blank.

If you are adding an authority but are not ready to enter tax rates, select No Reporting and later edit the field when you are ready to accumulate tax information.

Specify when to report tax on retainage for each tax authority:

• No Reporting. You can enter information for the tax authority in the Maximum Tax Allowable and No Tax Charged Below fields.
• At Time of Retainage Document. If Accounts Receivable and Accounts Payable specify Report Tax As Per Tax Authority, tax on retainage is posted to the tax accounts and tax reports are updated when you invoice for outstanding retainage.
• At Time of Original Document. Tax on retainage is calculated and reported when you post an original document that includes retainage.

Important! The choice of whether or not authorities report tax on retainage should be consistent within a tax group. If you change the option to, or from, No Reporting for one authority in a tax group, you should also update the other authorities in the tax group, or you may compromise the integrity of your data.

For more information, see About Reporting Tax on Retainage.

Select the base on which sales tax is calculated (except for summary invoice tax calculation in Accounts Receivable, where the amount is always the base regardless of the tax base selected here):

• Selling price. The base for calculating tax on an invoice or credit note is the item quantity multiplied by the price, which is entered in the item record.

• Standard cost. The tax base on an invoice or credit note item is calculated by multiplying the item quantity by the type of cost, as follows:

  • Accounts Receivable calculates tax on the item cost entered in the item record.
  • Order Entry calculates tax using the standard cost in Inventory Control.

• Most recent cost. The tax base on an invoice or credit note item is calculated by multiplying the item quantity by the type of cost, as follows:

  • Accounts Receivable calculates tax on the item cost entered in the item record.
  • Order Entry calculates tax using the most recent cost in Inventory Control.
• Alternate amount 1 or 2. Accounts Receivable calculates tax on the tax base entered in the item record. Order Entry calculates tax using the definable costs in Inventory Control.

This field appears only if the multicurrency option is selected in the Company Profile.

This feature allows you to report taxes in a specified currency that is not the customer/vendor currency or the functional currency.

Note: The currency of the tax authority must be the same as the currency of the tax group. All customers and vendors assigned to a tax group must use the same currency as the group.

You cannot change the currency after you have added the authority or group.