Sales Taxes: To Create a Sales Tax for Use in AR

By performing this implementation activity, you will learn how to configure a sales tax that will be used in AR documents and sales orders.

Story

The Muffins & Cakes company, which operates in Denver, Colorado, provides services subject to a 8.31% sales tax. You need to configure the sales tax, assign it to the TAXABLE category and the DENVER tax zone, and specify the tax calculation method for this tax.

You also need to define a 0% sales tax, because you have to report exempt sales in your tax report. This tax indicates that a sale should be reported as tax exempt.

Configuration Overview

For the purposes of this activity, in the U100 dataset, on the Tax Categories (TX205500) form, the TAXABLE and EXEMPT tax categories have been configured.

Process Overview

In this activity, on the Taxes (TX205000) form, you will create a sales tax and specify its tax rate, tax category and tax zone. On the same form, you will also create a sales tax of 0% to represent exempt sales in the tax report. On the Tax Zones (TX206000) form, you will then review the list of taxes assigned to the tax zone, and on the Tax Categories (TX205500) form, you will review the taxes assigned to each tax category.

System Preparation

Before you begin performing the steps of this activity, do the following:

1. Launch the MYOB Acumatica website with the U100 dataset preloaded, and sign in as a system administrator Kimberly Gibbs by using the gibbs username and the 123 password.
2. As a prerequisite activity, make sure the DENVER tax zone has been configured as described in Tax Zones and Categories: To Review Tax Categories and Create a Tax Zone for Sales Taxes.
3. As a prerequisite activity, make sure the COTAXDEP tax agency has been configured as described in Tax Agency: To Set Up a Tax Agency for Sales Taxes.

Step 1: Creating a Sales Tax

To create a sales tax, proceed as follows:

1. Open the Taxes (TX205000) form.
2. On the form toolbar, click Add New Record, and specify the following settings in the Summary area:
   • Tax ID: DENTAX
   • Description: Denver Sales Tax
   • Tax Type: Sales
   • Calculation Rule: Exclusive Document-Level

     This setting means that the tax amount is calculated on the sum of the line amounts to which this tax is applied.

   • Cash Discount: Does Not Affect Taxable Amount
   • Tax Agency: COTAXDEP
3. On the Tax Schedule tab, click Add Row on the table toolbar, and specify the following settings:
   • Start Date: 1/1/1900 (inserted by default)
   • Tax Rate: 8.31
   • Reporting Group: Taxable
4. On the Categories tab, click Add Row on the table toolbar, and select TAXABLE in the Tax Category column.
5. On the Zones tab, click Add Row on the table toolbar, and select DENVER in the Tax Zone ID column.

   The created tax will be applied to all taxable items sold to customers assigned to the DENVER tax zone.

6. On the GL Accounts tab, review the GL accounts assigned to this sales tax.

   The Tax Payable account is the liability account that accumulates the tax amounts to be paid to the tax agency. The account is credited in the tax amount when taxable invoices are released.

7. On the form toolbar, click Save to save your changes.

Step 2: Creating a 0% Sales Tax

To create a 0% (exempt) sales tax, proceed as follows:

1. While you are still on the Taxes (TX205000) form, click Add New Record on the form toolbar, and specify the following settings in the Summary area:
   • Tax ID: DENEXEMPT
   • Description: Denver Exempt
   • Tax Type: Sales
   • Calculation Rule: Exclusive Document-Level
   • Cash Discount: Does Not Affect Taxable Amount
   • Tax Agency: COTAXDEP
2. On the Tax Schedule tab, click Add Row on the table toolbar, and specify the following settings:
   • Start Date: 1/1/1900 (inserted by default)
   • Tax Rate: 0 (inserted by default)
   • Reporting Group: Exempt
3. On the Categories tab, click Add Row on the table toolbar, and select EXEMPT in the Tax Category column.
4. On the Zones tab, click Add Row on the table toolbar, and select DENVER in the Tax Zone ID column.
5. On the form toolbar, click Save to save your changes.

Step 3: Reviewing the List of Taxes

To review the list of taxes now available for the Denver tax zone, proceed as follows:

1. Open the Tax Zones (TX206000) form.
2. In the Tax Zone ID box, select DENVER; review the list of taxes that currently belong to this zone. Notice that the list includes both DENTAX and DENEXEMPT.
3. Open the Tax Categories (TX205500) form.
4. In the Tax Category ID box, select TAXABLE, and review the taxes in the table. The TAXABLE category now includes the DENTAX tax.
5. In the Tax Category ID box, select EXEMPT, and review the taxes in the table. The EXEMPT category now includes the DENEXEMPT tax.