Sales Tax (UG)

Owned by Tatum Hohl (Unlicensed)
Last updated: Apr 07, 2016
7 min read

Overview

NorthScope allows users to create Tax Classes, which can be applied to individual transactions in order to charge taxes on the taxable items on that transaction. Tax Classes are made up of individual tax details, which determine the calculations of the taxes as well as the GL Account to which taxes for the corresponding tax detail are posted. When a tax class is applied to a transaction, all tax details assigned to that tax class are charged on each taxable item on the transaction. The transactions that support sales tax include Fisherman Sales, Tender Resales, Customer Sales, and Employee Sales. However, each of these transactions can be set to enable or disable sales tax using the Company module preferences. 

Prerequisites 

Required Prerequisites

  • Currency
  • Tax Details
  • Tax Class
  • Item 'Taxable for Sales' Property Setup

Optional Prerequisites

  • Set the Company preference for "Enable Sales Tax on Fisherman Sales" to 'Yes'.
    • This will enable the tax functionality on Fisherman Sale transactions. This preference defaults to 'No'.
  • Set the Company preference for "Enable Sales Tax on Tender Resales" to 'Yes'.
    • This will enable the tax functionality on Fisherman Sale transactions. This preference defaults to 'No'.
  • Set the Company preference for "Enable Sales Tax on Customer Sales" to 'Yes'.
    • This will enable the tax functionality on Customer Sale transactions. This preference defaults to 'No'.
  • Set the Company preference for "Enable Sales Tax on Employee Sales" to 'Yes'.
    • This will enable the tax functionality on Employee Sale transactions. This preference defaults to 'No'.

Understanding the Data Flow

Tax Classes do not integrate to the host system. However, because tax classes can be applied to transactions, the financial effects of these applied taxes are integrated to the host system as part of the posted transaction's journal entry. 

Step 1: Creating Tax Details

Tax Details are assigned to Tax Classes, which are then assigned to individual transactions. The tax details on a tax class determine the amount of taxes that will be charged on the transaction as well as the GL account to which the sales tax charges will be posted. Therefore, tax details must be created in order to create tax classes. 

To create a tax detail, expand the Company module and select Tax Details. This will open the Tax Details list view. From the list view, click the New toolbar icon, which will open the list view in edit mode with five new lines for data entry. A new tax detail can be created with the following fields:

  • Tax Detail: Enter the name of the Tax Detail. Duplicate tax detail names are not permitted. 
  • Applies To: This field determines the type of transactions to which the tax detail is applicable. Currently, NorthScope only supports taxes applicable to sales transactions. Therefore, this field defaults to Sales.
  • Based On: This field determines the method upon which the tax calculations are based. Currently, NorthScope only supports calculating taxes based on a percent amount. Therefore, this field defaults to % Amount.
  • Rate: Enter the rate upon which the taxes are calculated - i.e. the percentage.
  • Currency: Select the currency to assign to the tax detail. 
  • Round: Select the rounding method to assign to the tax detail.
  • Max Trans Amount: Enter the maximum amount per transaction that is taxable for the corresponding tax detail. For example, if the Max Trans Amount was $1,000 but the transaction amount was $2,000, only $1,000 of the transaction would be taxed. 
  • GL Account: Select the GL account to which the charged taxes corresponding to the tax detail will be posted. 
  • Inactive: Select whether or not the tax detail is inactive. 

Step 2: Creating a New Tax Class

In order to create a new tax class, expand the Company module and select Tax Classes. This will open the Tax Classes list view. From the list view, click the New toolbar icon, which will open a new Tax Class record view. New Tax Class record views open with the following header fields, all of which are required:

  • Applies To: This field defaults to 'Sales' as NorthScope currently only supports the functionality of charging taxes on sale transactions. Because of this, this field is never editable by the user. 
  • Currency: Select the currency to assign to the Tax Class. Once the currency is selected and the tax class is saved, this field CANNOT be edited. The currency selection will determine the tax details that are eligible to be assigned to the tax class, as only tax details with the same currency will display once the tax class is saved.
  • Inactive: Select whether or not the tax class is inactive. Selecting 'Yes' from this drop-down will inactivate the tax class, which will prevent it from displaying in Tax Class drop-downs throughout NorthScope - including on transactions. This field is not editable until the tax class is saved, at which point it becomes enabled for edits. 
  • Tax Class: Enter the name of the tax class. In order to save the new tax class, the tax class must be unique by 'Tax Class' and 'Applies To' combination. Once saved, this field cannot be edited as it becomes a lookup of all tax classes, allowing the user to toggle between tax classes from within the record view. The Tax Class field value is the value that will appear in the Tax Class lookups. 

Once the Tax Class and Currency have been entered and selected respectively, the tax class can be saved. To save the tax class, click the Save toolbar icon. This will refresh the record view and render the following changes:

  • The Tax Class header field will become a lookup of all tax classes, defaulting to the newly created tax class.
  • The Currency header field will become disabled.
  • The Inactive header field will become enabled.
  • The grid will refresh to display all eligible tax details for assignment to the tax class. Eligible tax details are those that are active and are assigned the same currency as the tax class. 

Step 3: Assigning Tax Details to the Tax Class 

In order for a Tax Class to calculate any taxes when applied to a transaction, the tax class must have tax details assigned. In order to assign tax details to the tax class, simply select the tax detail's checkbox and click save. Clicking save will refresh the grid to display the assigned tax details at the top of the grid list. Multiple tax details can be assigned to a tax class but it is not required that a tax class has any tax details assigned. Tax details can be removed from a tax class at any time by unchecking the tax detail's corresponding checkbox and clicking save. 

Step 4: Setting Up Items to be 'Taxable for Sales'

In order for taxes to be charged on a transaction, the transaction must include items that are eligible for sales tax. In order to make an item eligible for sales tax, navigate to the Item's record view and open the Properties tab. Beneath the Group: Other, there is a property called Taxable for Sales, which defaults to 'No'. Set this property selection to 'Yes' and save in order to allow sales tax to be charged on that item. 

Step 5: Assigning the Tax Class as the Default for a Customer, Vendor, or Employee (Optional)

Tax classes can be made to default on a transaction based on the entity to which the sale is being made or from which the return is being made. In order for the Tax Class to default, the Customer's/Vendor's/Employee's record view must have the Tax Class property value selected. To do this, navigate to the entity's record view, open the Properties tab, and select the desired default tax class from the Tax Class field drop-down menu. Once this property is saved, any sale transaction made to the entity will default to the entity's Tax Class. However, the Tax Class is always editable. 

Note: Only tax classes that are assigned the same currency as the entity will display in the Tax Class lookup. 

Step 6: Applying the Tax Class to a Transaction (Optional)

The functionality to charge taxes is only applicable to Fisherman Sale, Tender Resale, Customer Sale, and Employee Sale transactions. For the functionality to be enabled on each of these transactions, the corresponding Company preferences must be set to enable sales tax. If the preference is set to enable sales tax for each of these transactions, then the Tax Class header field on each of these transactions will be enabled. When a transaction is created, the Tax Class field will default to blank. If the user manually selects a Tax Class that shares the same currency as the selected entity and saves, the Tax Class will remain selected. However, if the user selects a Tax Class that does not share the same currency as the selected entity, the entity's default Tax Class will be selected upon save. The Tax Class field will be editable until the transaction is approved or posted, at which time the field becomes disabled.

Once a transaction is applied a tax class, taxes will be calculated based on the tax details assigned to the tax class for each item that is deemed 'Taxable for Sales'. 

If the transaction results in taxes being calculated, a single non-editable line item will be displayed with the following values:

    • Description: “Tax – “ + Tax Class name
    • Extended: Total amount of the tax(es)

Each time the transaction is saved from or to a status of New, the tax line will be recalculated. 

When a transaction with taxes is posted, each tax detail's posting account will be credited if the tax amount is positive or will be debited if the tax amount is negative. Therefore, if a transaction is saved from a status of 'Approved' to 'Ready to Post', the taxes will NOT be recalculated. 

Note: Because Customer and Employee Sales share the same initial transaction record view, if the preference to 'Enable Sales Tax' is set to 'No' for either of these transactions, the Tax Class header field will be disabled on the New Sale window until the transaction is saved and it can be determined whether the transaction is a Customer or Employee Sale and has sales tax enabled. 

Step 7: Running the City Sales Tax Report (Optional)

The City Sales Tax report can be ran by expanding the Purchasing module, clicking Reports, selecting the City Sales Tax report and clicking Run Report. Then, the user can enter the parameters for the report. These parameters include the Start Date and End Date, which determines the range of transactions that will be displayed, as well as Tax Class, which allows the user to select the Tax Class(es) to include on the report. Once the parameters have been entered, click View Report. 

The City Sales Tax report will display the following information per transaction, grouped by Tax Class then grouped by entity:

  • Date
  • Trans ID
  • Sub Total
  • Taxable
  • Tax
  • Net Amount
  • Over Max
  • Calculated Tax

The totals are then summed per entity and then per Tax Class.