Create sales tax codes
You can create sales tax codes when initially setting up Finance. 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.
The following video shows how to set up the sales tax codes.
The sales tax code is a central part of the setup of taxes in Finance. Sales tax codes specify the following parameters:
How to calculate taxes
The value to use for tax calculation
The sales tax value is important because no tax is calculated without it. A sales tax code includes information about:
How to calculate, post, and report the taxes.
When to make the payments.
To whom to make the payments.
You can define the sales tax rate for the following entities:
Various intervals and periods in the Values area
Limits on sales tax amounts in the Limits area
On the Calculation FastTab, in the Origin field, if Amount per unit is selected, the system multiplies the value by the quantity on the transaction to calculate the sales tax amount. If the tax code isn't a unit-based tax, the value is a percentage that the system applies on the Origin field for this tax code to calculate the sales tax amount.
Select from the following options in the Origin list:
Percentage of net amount - Percentage of purchase or sale, excluding any other taxes.
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, including all other taxes or duties.
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, in the Sales tax on sales tax field, you can set up the specific sales tax code that you based the current sales tax code on.
Amount per unit - Indicate the unit on which the system calculates sales tax in the Unit field. If the transaction is in another unit, it converts automatically based on Unit conversion in Inventory.
Calculated percentage of the net amount - You can use the calculated percentage of net amount calculation method to calculate input tax deduction for per diem expenses (as used, for example, in Germany).
Tax calculation allows the global tax engine to automate and simplify the tax determination and calculation process. To set up tax calculation in Finance, go to Tax > Setup > Tax configuration > Tax calculation parameters.
You can also use the Tax calculation data model to automate and standardize tax determinations and calculations. It includes the header fields and line fields of transaction documents in Finance.
Sales tax code intervals - Values and limits
Values define the tax to calculate, on a percentage or amount for each unit, based on the effective interval dates and the minimum and upper limits. These limits refer to the minimum and upper sales amounts to which the amount in the Value field applies.
Limits define the tax to calculate based on the effective interval dates and the minimum and maximum sales tax. These limits are the minimum and maximum sales tax that the system calculates on the sale after it performs all tax calculations.