About Taxes

Order Entry can calculate taxes for documents automatically, or you can manually enter and distribute tax amounts to document details.

Calculating Tax Amounts Automatically on Documents

Order Entry calculates sales tax using the rates defined for the customer tax class and item tax classes for each authority that can levy taxes on the customer.

You specify the tax rates for tax authorities and tax classes in Tax Services.

Order Entry calculates sales taxes automatically if:

  • The Calculate Tax option on the Taxes tab is selected. (The option is selected by default.)

  • The customer is subject to tax.

    You enter the tax classes and tax registration numbers for each customer in Accounts Receivable. However, you can change the customer tax class for individual documents on transaction entry screens.

  • The document contains taxable items or taxable miscellaneous charges.

    Item tax classes are set up in Inventory Control, but you can change the tax classes for a detail while editing the detail line. You can also specify whether tax is included in or excluded from the price of an item.

Entering and Distributing Tax Amounts

You can use the Taxes tab on the Order Entry screen to manually enter and distribute tax amounts and tax reporting amounts (if reporting tax in another currency).

For instructions, see Entering and Distributing Tax Amounts and Entering Taxes Manually .

Changing Tax Amounts

You can change the tax amounts on Order Entry orders, shipments, invoices, credit notes, and debit notes by changing the following settings:

  • The tax group and tax classes for the customer.

    The customer tax group determines the tax jurisdiction (taxing authorities) for the document.

    The customer tax classes determine whether the customer is subject to tax within a jurisdiction.

  • The tax class, taxable status, or tax amount for any of the detail lines.

    Default item tax classes are assigned to items in Inventory Control.

  • The actual tax amounts for the entire document or for individual details.

For instructions on changing tax groups and tax classes, see Changing Tax Groups and Tax Classes for Order Entry Documents .

For instructions on changing tax amounts directly, see Changing Tax Amounts for Order Entry Documents .

Tax Groups and Tax Classes

Tax groups and tax classes are defined in Tax Services.

A customer tax group determines the tax authorities (jurisdictions) to which a customer is subject. Customers are assigned to tax groups in Accounts Receivable, and they are assigned a tax class for each authority in their tax group. In a multicurrency system, the tax group on a document must use the same currency as the account set specified in the customer record.

Inventory items are assigned default item tax classes in Inventory Control.

For instructions on changing tax groups and tax classes, see Changing Tax Groups and Tax Classes for Order Entry Documents .

Tax Groups and Order Entry Templates

If you use Order Entry templates, the tax group you select for a template is used for an order or shipment only if you have not yet added the customer record. The tax group specified in the customer record always overrides the tax group specified in the template.

If you use multicurrency accounting, when you use a template to create an order or shipment for a customer that has not yet been added to Accounts Receivable, the tax group sets the currency and the reporting currency for the order or shipment.

For more information, see O/E Templates Screen.

Tax Groups and Project and Job Costing

Project and Job Costing allows tax groups to be specified by project on an invoice. When Project and Job Costing creates an invoice, it uses each project's tax group to calculate tax. Therefore, you can enter details for contracts and projects that use different tax groups on the same document, provided Project and Job Costing handles the invoicing. (This is the case if you select Project Invoicing for a document.)

However, if you will produce the invoice in Order Entry, you must use separate orders for contracts and projects that use different tax groups. This is because the tax group specified for an Order Entry invoice applies to all the document details.

Note: If you create an order or shipment for a "non-existent" customer (a customer for which no record exists in Accounts Receivable) and select Project Invoicing, you will not be able to add order or shipment details unless the default template includes a tax group. (The tax group is not editable if you select Project Invoicing, and it will be blank unless it is specified in the template.)