Use a self-assessed tax

Sage 300 ERP

Use a self-assessed tax

Overview

A self-assessed tax is one that you must pay, even though the vendor does not collect it. These taxes commonly arise when you order goods from another state or province, but you are still subject to local sales taxes.

Accounts Payable does not have a self-assessing tax type, but you can use the program to calculate self-assessing taxes and distribute them to expense and tax payable accounts. The trick is to create two tax authorities.

To create and use a self-assessed tax:

  1. In Tax Services create two new tax authorities:
    • Authority 1 is the tax expense. This tax can be distributed with the invoice amount or expensed separately to a tax expense account.
    • Authority 2 is the tax payable. Specify that this tax is expensed separately to the tax payable account.
  2. Create Purchases tax classes for vendors and items for both tax authorities.
  3. Enter tax rates for purchases for each of the authorities:

    For authority 1 specify the tax rate as you would for any other tax.

    For authority 2 specify a negative tax rate of the same amount that you specified for authority 1.

    The two taxes will cancel each other and not add to the value of the invoice.

  4. Add both taxes to the tax group you want to use for the vendor.
  5. Specify the self-assessing tax group when you add an invoice.
  6. Make sure that you are using the same tax class for both taxes.
  7. If you are not calculating tax, enter a positive tax amount for authority 1 and a corresponding negative amount for authority 2 on the Vendor Taxes tab.

    If you are calculating tax, set the two taxes to "No" for Tax Included.