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Setting up Taxes

Problem Details:

How to setup taxes so they calculate automatically on invoices?

 

Solution:

Taxes are setup under Common Services / Tax Services.  The first step in setting up taxes is to setup a tax authority.  Let's use the GST as an example.  Open the Tax Authority function and assign a 6 character (or less) code for the GST.  On the Accounts tab, enter the liability and the recoverable (if applicable) GL accounts. 

Next open up Tax Classes and select the GST tax authority.  The most typical setup is to have Tax Class 1 be taxable and Tax Class 2 be non-taxable.   Set both these classes up for Sales - Customers & Items, and Purchases - Vendors & Items. 

Open Tax Rates and fill in the grid.  If the item is taxable, but the customer is non-taxable, the rate will be zero.  If the customer is taxable, but the item is non-taxable, the rate will also be zero.  However, if both item and customer are taxable, the rate is 5%. 

The tax rates need to be setup for both Sales and Purchases.

The final step is to setup the Tax Group.  Open Tax Groups and enter a 6 character (or less) code for each group.  Insert all the tax authorities that apply.  For example, in a tax group for BC - the tax authorities would be GST and PST. 

Note:  the Taxable field refers to whether or not the tax is taxable by another tax authority, not whether or not the tax authority will calculate for the document it will be applied to.  For example, in BC, the GST is not charged on PST and PST is not charged on GST so the Taxable fields will be set to No. 

This completes a very basic tax setup. 

Assign a default tax group to a customer in AR Customers / Customers on the Invoicing tab.  Here a default tax class (1 or 2, taxable or non-taxable) is also assigned.  When an AR invoice, or an OE order for this customer is created, these defaults will automatically populate the document.  However, they can be changed at the time of entry if the defaults do not apply to the specific circumstance. Defaults for taxes are also defined for Items in AR Setup / Items, and IC Items & Price Lists / Items. 

 

 

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