Use tax assessment

Use tax assessment is a feature that enables US legal entities to calculate the tax liability for purchases that are subject to use tax. Use tax is a type of sales tax that applies when a taxable item is purchased from an out-of-state vendor or an online retailer that doesn't collect sales tax from the buyer. The buyer is responsible for paying the use tax to the state where the item is used, stored, or consumed.

The Accrue use tax option in Tax calculation parameters helps US legal entities comply with the tax laws and regulations of their states by automatically generating use tax transactions, based on the purchase transactions and the tax rates of the states.​

Enable the Accrue use tax option to activate the use tax assessment–related fields and functionality in Accounts Payable (AP) invoicing scenarios. After it's enabled, the following fields and parameters are activated for use tax assessment.

• The Vendor charged sales tax field is introduced on the header of a vendor invoice. You can use it to record the total sales tax amount that's charged by the vendor invoice. If the vendor invoice is imported, the amount in the Imported sales tax field is automatically carried over to the Vendor charged sales tax field.

• The Accrue sales tax type field is introduced in the vendor master and on the header of the vendor invoice. It controls the tax assessment process. Select one option for each vendor in the vendor master to set the default behavior for processing of the Vendor charged sales tax value. On the header of the vendor invoice, you can select a different behavior for each invoice transaction.

  • Default – Use the default behavior, which ignores the amount in the Vendor charged sales tax field. The sales tax amount and sales tax transactions are calculated and populated via sales tax logic. No other assessment is done.
  • Adjust sales tax
  • Accrue use tax – This option is available if you enabled the Accrue use tax option according to the guidance in Configure a tax solution provider. Use tax transactions are populated when the Vendor charged sale tax value is less than the tax liability that your tax solution provider calculates. For more details, contact your tax solution provider.
  • Advanced – Select this option when your tax solution provider supports advanced use tax assessment processes that consider the fields in the Overcharge tolerance section. For more details, contact your tax solution provider.

• The fields in the Overcharge tolerance section are introduced in both Tax calculation parameters and the vendor master. They're used to perform advanced tax transaction handling when the Vendor charged sales tax value differs from the tax calculation result. For more details, contact your tax solution provider.

Adjust sales tax

Th Adjust sales tax option is available after you enable the Adjust sales tax amount per vendor charged sales tax feature (in version 10.0.39 and later). Select this option if you want to fully accept the sales tax amount that the vendor charges. In this case, a sales tax adjustment transaction is generated to override the tax calculation result.

Note

The Adjust sales tax amount per vendor charged sales tax feature is a standalone core feature. It doesn't require that you enable a tax solution provider. You can enable the feature to activate the Vendor charged sales tax and Accrue sales tax type fields without connecting to an external tax solution provider.