When Sales Taxes are configured within NorthScope, users will be able to record and collect taxes on Customer Sales, Employee Sales, Fisherman Sales and Tender Resales.  This provides users with a way to track the collection of sales taxes.  Sales taxes can also easily be configured if you sell to tax-exempt customers. 

The purpose of this guide is to provide instruction for configuring sales tax for use on transactions. 

Prerequisites 

This section identifies the required and optional Master Files used to configure and use Sales Tax within NorthScope. Sales Tax can be configured in either Sales or Fisherman Accounting. The table below identifies the sequence they should be configured in from either place. 

Understanding how Sales Tax works in NorthScope

When a Quick Sale, Fisherman Sale, or Tender Resale transaction is enabled for sales tax, sales tax will be calculated for all taxable line items based on the Tax Class assigned to the transaction. Tax Classes can be manually assigned to transactions or can be set on the Customer and/or Fisherman Master File so they default on transactions. Sales Tax is calculated as follows:

1. The transaction identifies the Tax Class. 
   1. The Tax Class identifies the Tax Detail(s) that make up the Tax Class
      1. The Tax Details specify the rules for calculating sales tax and posting to the general ledger
         1. The Tax Details are processed against every taxable line item on the transaction

When a Tax Class is applied to a transaction, all Tax Details assigned to the Tax Class are applied to each taxable item on the transaction. The total tax calculated for each taxable line item is rolled up to display the Sales Tax Amount.

Configuring Sales Tax

Item Properties

Sales Tax is only calculated for items that are taxable, items where the 'Taxable for Sales' property is set to "Yes" on the Item Record. There are two ways to set your items up as taxable:

1. Mass Update all Items belonging to the same Item Class. This process will update all items assigned to the item class with the value you have set in the 'Taxable for Sales' property. 
   1. Open the Item Class Record View
   2. Set the 'Taxable for Sales' property to "Yes"
   3. Click the "Roll Down" checkbox
   4. Save the record
2. Update items one at a time. This process will update a single item 
   1. Open the Item Record View
   2. Set the 'Taxable for Sales' property to "Yes"
   3. Save the record

Tax Details & Tax Classes

Sales Tax within a State often varies by city. For example, sales tax for three cities in Washington State is determined as follows:

Because of this, there are two primary strategies for setting up Tax Details and Tax Classes. Each are described below and you should pick the one that will work best for you. However, you are not limited to only one of these strategies.

Strategy 1: One Tax Detail for each Tax Class

Using this strategy, you would configure 3 separate Tax Details and 3 separate Tax Classes (one for each city). Each city's Tax Detail would be assigned to the corresponding Tax Class. The benefit of this approach is that it is simple to setup and more obvious for auditing. This approach can only be used if each of the following are true:

1. The total tax posts to the same GL Account. For example, the entire 10.1% of the Redmond tax posts to the same GL Account rather than the City portion hitting one GL Account and the State portion hitting another.
2. The entire tax amount is calculated the same. For example, the entire 8.7% of the Bellingham tax is calculated with the same logic, rather than the State and City amounts having different rules. If the State portion was calculated for the entire amount but the City portion was only calculated for the first $3,000, you could not use this approach.

With this approach, your setup for the Tax Classes would be

Strategy 2: Multiple Tax Details for each Tax Class

Using this strategy, you would configure 4 separate Tax Details and 3 separate Tax Classes. A Tax Detail would be created for the WA State Rate (6.5%) and one for each city that only contains the City Rate. The benefit of this approach is that it provides you visibility to each of the individual components that make up the Total Tax. This approach must be used if any of the following are true:

• The total tax posts to the different GL Accounts. For example, Redmond sales tax posts to two GL Accounts:
  • City Tax Payable
  • State Tax Payable 
• The tax amount is calculated using different logic. For example, the State portion of the Bellingham tax has no cap but the City portion does. 

With this approach, your setup for the Tax Classes would be

Tax Details

To create a new Tax Detail record that can be applied to a Tax Class, navigate to Sales → Configuration → Tax Details or to Fisherman Accounting → Configuration → Tax Details. 

Click the New button on the toolbar and the list view will open 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 unique name you for the Tax Detail (e.g. Redmond, WA) 
• Applies To: Select the type of transactions the tax detail is applicable for. NorthScope currently only supports taxes for Sales transactions. 
• Based On: Select the Tax Detail's calculation method. NorthScope currently only supports calculating taxes based on a % Amount.
• Rate: Enter the Tax Detail's rate - i.e. the percentage up to 5 decimals of precision.
• Currency: Assign the currency for the Tax Detail. The lookup contains all the currencies setup for your company.  
• Round: Specify the rounding method used for the Tax Detail.  
  • Round - The calculated Tax Amount for this Tax Detail rounds up if the 3rd decimal digit is >=5 otherwise it rounds down
    • 25.124 will round to 25.12
    • 25.126 will round to 25.13
  • Round Down 2 Decimals - The calculated Tax Amount for this Tax Detail always rounds down
    • 25.124 will round to 25.12
    • 25.126 will round to 25.12
  • Round Up 2 Decimals - The calculated Tax Amount for this Tax Detail always rounds up
    • 25.124 will round to 25.13
    • 25.126 will round to 25.13
• Max Trans Amount: Enter the maximum transaction amount the Tax Detail is calculated up to. 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 subject to this Tax Detail.  If this does not apply, enter as 0.00
• GL Account: Assign the GL Account that will be Credited for the calculated tax amount for this Tax Detail (or Debited for a return).  
• Inactive: Specify whether the Tax Detail is active or inactive. Inactive Tax Details cannot be assigned to Tax Classes. If an assigned Tax Detail is inactivated, it will be removed from all Tax Classes it is assigned to.

Tax Class

Tax Classes store all the Tax Details (individual taxes) used to calculate sales tax on Quick Sales, Fisherman Sales, and Tender Resale transactions.

To create a new Tax Class record navigate to either:

• Sales → Configuration → Tax Class
• Fisherman Accounting → Configuration → Tax Class. 

Click the New button on the toolbar, which will open a new Tax Class record view. When the page opens, configure the following header fields:

Header Fields

• Tax Class: Enter the unique name you for the Tax Class. The name must be unique by 'Tax Class' and 'Applies To'. Once saved, this cannot be edited. This is the value that will be assigned to Customers, Fishermen, and Transactions. 
• Applies To: Select the type of transactions the tax detail is applicable for. NorthScope currently only supports taxes for Sales transactions. 
• Currency: Assign the currency for the Tax Detail. The lookup contains all the currencies setup for your company. Once saved, this cannot be edited.  
• Inactive: Specify whether the Tax Class is active or inactive. Inactive Tax Classes cannot be assigned to Customers, Fishermen, and Transactions. 

Click the Save button. Once the record has been successfully saved, the page with refresh with the following changes:   

1. The Tax Class header field will become a lookup of all tax classes, defaulting to the newly created tax class.
2. The Currency header field will become disabled.
3. The Inactive header field will become enabled.
4. The Grid will be populated with all the 'Active' Tax Details that contain the same 'Applies To' and 'Currency' as this Tax Class.

Grid Fields

Assign all the Tax Details that apply to this Tax Class by clicking their associated checkboxes. If none of the Tax Details apply (e.g. you are making a Tax Class for Tax Exempt) then do not assign any Tax Details. Tax details can be removed from a Tax Class at any time by unchecking the Tax Detail's corresponding checkbox and clicking save. 

Preferences

Sales Preferences

Before Sales Tax can be calculated on a Quick Sale Transaction, it must be enabled in the Sales Order Preferences. To do this follow these steps:

1. Navigate to: Sales → Configuration → Preferences
2. Scroll down to the 'Sales Tax' Preference Group
   1. Enable Sales Tax on Customer Sales - Set to "Yes" to enable or "No" to disable this feature on Quick Sales for Customers
   2. Enable Sales Tax on Employee Sales - Set to "Yes" to enable or "No" to disable this feature on Quick Sales for Employees

 If the transaction is not enabled for Sales Tax, the 'Tax Class' will not default from the Customer and the 'Tax Class' field on the Quick Sale transaction is disabled. As a result, nothing can be assigned to calculate sales tax. Disabling the transaction for Sales Tax ensures that a Tax Class cannot be inadvertently assigned.

Fisherman Accounting Preferences

Before Sales Tax can be calculated on a Fisherman Sale or Tender Resale Transaction, it must be enabled in the Fisherman Accounting Preferences. To do this follow these steps:

1. Navigate to: Fisherman Accounting → Configuration → Preferences
2. Scroll down to the 'Sales Tax' Preference Group
   1. Enable Sales Tax on Fisherman Sales - Set to "Yes" to enable or "No" to disable this feature on Fisherman Sale transactions
   2. Enable Sales Tax on Tender Resales - Set to "Yes" to enable or "No" to disable this feature on Tender Resale transactions 

 If the transaction is not enabled for Sales Tax, the 'Tax Class' will not default from the Fisherman and the 'Tax Class' field on the Fisherman Sale/Tender Resale is disabled. As a result, nothing can be assigned to calculate sales tax. Disabling the transaction for Sales Tax ensures that a Tax Class cannot be inadvertently assigned.

Assigning default Tax Classes

Tax Classes can default on a transactions based on the entity to which the sale is being made to. When configured, any sale transaction made to the entity will default to the entity's Tax Class. However, the Tax Class is always editable.  

Customers

This is not required but is recommended in companies where the Sales Tax rules for a customer are fixed. For example, if your customer is located in Redmond, WA and they are charged sales tax then defaulting the Tax Class ensures they will be charged sales tax. If the customer is always Tax Exempt you may want to create and assign a Tax Exempt Tax Class (a Tax Class with no Tax Details assigned). 

To assign a default Tax Class to a Customer, follow these Steps;

1. Navigate to the Customer List View 
2. Select a Customer and open the Record View
3. Scroll down to the Tax Class property
4. Assign the correct Tax Class - only Tax Classes with the same Currency as the Customer will be displayed
5. Save your changes

Fishermen & Tenders and Loans

This is not required but is recommended in companies where the Sales Tax rules for a Fisherman are fixed. For example, if your Fisherman is buying Bait in Kodiak, AK and they should be charged sales tax, defaulting the Tax Class ensures they will be charged sales tax. If they are always Tax Exempt you may want to create and assign a Tax Exempt Tax Class (a Tax Class with no Tax Details assigned). 

To assign a default Tax Class to a Fisherman or Tender, follow these Steps;

1. Navigate to the Fisherman & Tender List View
2. Select a Fisherman and open the Record View
3. Scroll down to the Tax Class property
4. Assign the correct Tax Class- only Tax Classes with the same Currency as the Fisherman will be displayed
5. Save your changes

To assign a default Tax Class to a Fisherman Loan, follow these Steps;

1. Navigate to the Fisherman & Tender List View
2. Select a Fisherman and open the Record View
3. Scroll down to the Tax Class property
4. Assign the correct Tax Class
5. Save your changes

Applying Sales Tax to Transactions

In order for Sales Tax to be charged on a transaction, the transaction must include one or more items that are eligible for sales tax

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 Fisherman Accounting and Sales 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 record until the transaction is saved and it can be determined whether the transaction is a Customer or Employee Sale and has sales tax enabled.