About Calculating Tax

Account Payable gets all its tax rates and tax account information from Tax Services, which is part of Sage 300 ERP's Common Services.

Accounts Payable provides three methods for entering tax amounts and tax bases on invoices, credit notes, and debit notes:

• You can let the program calculate all taxes for you.
• You can enter all taxes manually for the document and its distribution lines.
• You can enter total tax amounts for the document, and then prorate and allocate the total amounts to distribution lines.

Whether you let the program calculate taxes or you enter them manually, Accounts Payable sends all the appropriate tax information to Tax Services for tax reporting purposes.

Specifying a Tax Entry Method for a Document on the Invoice Entry Screen

You specify how taxes are calculated for a document on the Taxes tab of the Invoice Entry screen. In the Tax Amount and the Tax Base fields, you can select:

• Enter. If you select this method, you enter total tax amounts and/or tax bases on the Taxes tab manually, and enter tax amounts for each detail on the Detail Accounts/Taxes screen using the information from the invoice.

  If you want, you can distribute amounts automatically to the invoice details using the Distribute Taxes button. You can edit the detail taxes, later, on the Detail Accounts/Taxes screen.

  Note: Clicking the Calculate Taxes button overrides all manually entered taxes—the total amounts on the Taxes tab as well as the detail taxes.

• Distribute. If you select this method, you enter the total tax amounts and/or tax bases on the Taxes tab manually, using the information from the invoice.

  You use the Distribute Taxes button to allocate to invoice the total tax amounts you enter manually.

  Note: You cannot edit taxes on the Detail Accounts/Taxes screen if you choose this method.

• Calculate. If you select this method, you let the program calculate and distribute taxes when you add the invoice or distribute the invoice amount.

  The only way to change the amounts calculated for a document is by changing one of the following:

  • The tax group
  • The tax classes

  If you choose Calculate for the tax amount and Distribute or Enter for the tax base, the program uses the tax base to calculate tax amounts automatically.

  The main reasons for having the program calculate tax are:

  • To check the tax amount that appears on the invoice.
  • To track a tax which is hidden in the invoice total.

Note: Accounts Payable automatically uses the default tax entry method specified on the Transactions tab on the A/P Options screen. You can change the method for individual invoices.

Tax Groups and Tax Authorities

The tax group you select for an invoice determines which tax authorities appear on the Taxes tab and the tax class for each tax authority. The only way to change the list of tax authorities is by changing the tax group.

For an overview of tax groups, see About Tax Groups.

Tax Classes

The tax class usually determines whether goods are taxable.

You can change the tax classes for each tax authority on the Taxes tab.

If you select Calculate as the tax entry method, you can also change the tax classes for individual distribution lines using the Detail Accounts/Taxes screen.

Tip: Whatever method you choose, you can always override manually entered amounts by clicking the Calculate Taxes button.

Tax Included Amounts

The Tax Included field on the Taxes tab determines whether distribution amounts are net of taxes or include taxes.

Note: You can change the Tax Included setting only if the tax authority permits it.

Tax on Retainage

You can report taxes on retainage amounts when you post an original invoice or when specified by a tax authority. Accounts Payable respects the option specified for each tax authority.

This feature meets the reporting requirements for GST and VAT, for which tax is reported separately on the amount payable on the original invoice, and then on the amount of the retainage when the retainage is due.

Tax Reporting in Multicurrency Ledgers

In a multicurrency system, if you assign to the invoice a tax group that uses a different currency than the vendor, Tax Reporting fields appear. Tax reporting amounts are required in some jurisdictions, such as Singapore.

You can let Accounts Payable automatically calculate all taxes in source currency, functional currency, and the tax reporting currency.

You can also change the rate type, rate date, and exchange rate for the tax reporting currency, and let Accounts Payable calculate the Tax Reporting amounts for each authority.

Distributing Document Taxes

When Accounts Payable distributes tax amounts to invoice details, it:

• Checks the Taxes tab to see which taxes apply to the vendor and the tax entry method.

  • If Calculate is not selected, Accounts Payable uses the tax amounts entered on the Taxes tab.
  • If Calculate is selected, Accounts Payable checks the Tax Included settings, then calculates the total tax amount for the distributions listed on the Document tab.

• Allocates entered or calculated taxes in the same proportion as you distributed the rest of the invoice amount.

• Removes any proportion of the tax that is recoverable from the tax distribution amount, and assigns it to the tax recoverable account.

  You define tax authorities and specify whether taxes are recoverable using the screens in the Tax Services folder.

• Removes any tax that is separately expensed from the tax distribution amount and assigns it to the tax expense account.

  You specify whether taxes are expensed separately in Tax Services.

Tax Services performs the tax calculations when you click the Distribute Taxes button on the Taxes tab.

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