September 18, 2009

gptip42day - Tax Details vs. Tax Schedules - It Taxes My Mind

This topic can be a user confuser so let's make it simple.  For example, here in the Sunshine State (FL), the state sales tax is 6%.  Most counties and some municipalities also impose a local sales tax.  These two components of sales tax are each considered a 'Tax Detail' in GP-speak.  The combination of two or more tax details is called a 'Tax Schedule'.  The importance of Tax Details and Tax Schedules comes down to accurate, detailed reporting to the taxing authorities.

Tools>Setup>Company>Tax Details

* click image to enlarge

When setting up Tax Details, some users mistakenly lump multiple components of the total tax into one Tax Detail.  This is all well and good - the correct tax amount is calculated on a sales invoice.  But when it comes time to report state and local tax to the taxing authorities, how do you breakout the state vs. local tax?  That's where the Tax Schedule comes in handy.

Tools>Setup>Company>Tax Schedules

* click image to enlarge

Setting the multiple tax components in a Tax Schedule allows for accurate calculation and reporting of taxes to the respective taxing authorities.  Just set all your Tax Details first, then in the Tax Schedules window, mix and match the Tax Details to create all the Schedules you need to correctly assess sales tax on your customer invoices.  Then go into your Customer Cards and set the correct Tax Schedule for each customer.  The result will be automatic tax calculation of the correct rate(s) on Sales Invoices and the ability to report accurately to the taxing authorities.

Note:  Tax Details are setup separately for Sales and Purchases.  Make sure when setting sales tax details for customers and vendors that you make the correct selection in the 'Type' field.

Monday, we'll look at how the 'Shipping Method' affects sales tax calculation.  Have a great weekend all!

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