Use Taxes: Implementation Activity

By performing the following implementation activity, you will learn how to configure a use tax that will be applied to AP documents.

Story

Suppose that the SQUEEZO vendor, from which the SweetLife Fruits & Jams company buys juicers, does not charge the sales tax from its buyers that are located outside of New Jersey, where this vendor is located. Therefore, all the purchases made from this vendor are subject to the use tax of the New York state, where SweetLife is located.

The chief accountant of the SweetLife company needs to update the tax agency settings, tax report, and the vendor to be able to pay the use tax to the NY tax agency.

Configuration Overview

In the U100 dataset, the following tasks have been performed for the purposes of this activity:

  • On the Tax Categories (TX205500) form, the TAXABLE tax category has been configured.
  • On the Vendors (AP303000) form, the SQUEEZO vendor account has been configured and the NYTAXDEP vendor has been configured as a tax agency.
  • On the Reporting Settings (TX205100) form, a tax report has been configured for the NYTAXDEP tax agency.

Process Overview

In this activity, you will start the configuration of a use tax by creating a tax zone on the Tax Zones (TX206000) form. On the Vendors (AP303000) form, you will update the settings of the needed vendor and those of the tax agency. On the Reporting Settings (TX205100) form, you will modify the tax report. Finally, you will create a use tax on the Taxes (TX205000) form.

System Preparation

Before you begin to configure the use tax, launch the MYOB Acumatica website with the U100 dataset preloaded, and sign in as an accountant Anna Johnson by using the johnson username and the 123 password.

Step 1: Creating a Tax Zone

To create a tax zone, proceed as follows:

  1. Open the Tax Zones (TX206000) form.
    Tip: To open the form for creating a new record, type the form ID in the Search box, and on the Search form, point at the form title and click New right of the title.
  2. On the form toolbar, click Add New Record, and specify the following settings in the Summary area:
    • Tax Zone ID: NYUSE
    • Description: Use tax zone
    • Default Tax Category: TAXABLE

    After you assign this zone to a particular vendor, taxable items purchased from this vendor will be subject to use tax.

  3. On the form toolbar, click Save to save the created tax zone.

Step 2: Updating the Settings of the Tax Agency and the Vendor

To update the settings of the tax agency and the vendor for whose documents you want to apply the use tax, proceed as follows:

  1. Open the Vendors (AP303000) form.
  2. In the Vendor ID box, select NYTAXDEP.
  3. On the Tax Agency tab, select the Update Closed Tax Periods check box.
  4. On the form toolbar, click Save to save your changes.
  5. In the Vendor ID box, select SQUEEZO.
  6. On the Purchase Settings tab, in the Tax Zone box, select NYUSE.
  7. On the form toolbar, click Save to save your changes.

Step 3: Updating the Tax Report

To update the tax report, proceed as follows:

  1. Open the Reporting Settings (TX205100) form.
  2. In the Tax Agency box, select NYTAXDEP.
  3. On the Report Lines tab, click Add Row on the table toolbar, and specify the following settings:
    • Description: Purchases Subject to Use Tax
    • Update With: Taxable Amount
    • Update Rule: +Output-Input

      This report line will accumulate the total of purchases that are subject to a use tax.

  4. On the form toolbar, click Save to save your changes.
  5. On the Reporting Groups tab, click Add Row on the table toolbar, and specify the following settings:
    • Name: Use tax
    • Group Type: Output

      The use tax is paid to the tax agency; therefore, it is of the Output type.

  6. On the form toolbar, click Save to save your changes.
  7. Make sure that the Use tax group is selected in the table, and on the table toolbar, click Group Details. The Reporting Groups (TX205200) form opens.
  8. On this form, add the following rows to the table:
    • Report Line: 2 - Tax Total
    • Report Line: 6 - Purchases Subject to Use Tax
  9. On the form toolbar, click Save to save your changes.

Step 4: Creating a Use Tax

To create a use tax, proceed as follows:

  1. Open the Taxes (TX205000) form.
  2. On the form toolbar, click Add New Record, and specify the following settings:
    • Tax ID: NYUSETAX
    • Description: New York use tax
    • Tax Type: Use
    • Calculation Rule: Exclusive Document-Level

      Before configuring a use tax in the production environment, you should know exactly which calculation method should be applied in this box.

    • Cash Discount: Does Not Affect Taxable Amount
    • Exclude from Tax-on-Tax Calculation: Selected

      This check box is selected by default, because the use tax is a first-level tax and should be excluded from tax-on-tax calculation.

    • Tax Agency: NYTAXDEP
  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: 8.875
    • Reporting Group: Use tax
  4. On the Categories tab, click Add Row, and select TAXABLE in the Tax Category column.
  5. On the Zones tab, click Add Row, and select NYUSE in the Tax Zone ID column.
  6. On the GL Accounts tab, make sure that the Use Tax Expense Account check box is selected, and select 65200 - Use Tax in the Tax Expense Account box.
  7. On the form toolbar, click Save to save your changes.