Tax Application in Sales Documents

Based on where items are ordered from, they may be subject to particular sales taxes. The rate and the amount of the sales taxes that apply to sales orders and sales invoices can depend on many factors, including the types of items purchased, the delivery address of the customer, the address of the selling branch, and the business presence of your organization in the customer location.

If automatic calculation of taxes is configured in your system, the system determines the applicable taxes for each sales order or invoice based on the tax categories of the items sold and the tax zones assigned to customer locations. For more information, see Tax Zones and Tax Categories.

With MYOB Acumatica, to minimize tax-related errors that users make when they enter sales orders, cash sales, and invoices, you can provide default values for the tax zones used for tax calculation, as described in this topic.

Sales Taxes on Sales Orders

If you know exactly which tax zone should be used for a specific sales order, you can override the default setting and select it in the Customer Tax Zone box. For details, see Taxable Sales with Freight Charges: Process Activity.

Taxes Applicable to Freight Sales

If your company provides freight as an additional service that is subject to taxes, you configure a ship via code for the shipping options provided by your company (that is, a ship via code with the Common Carrier check box cleared on the Ship via Codes (CS207500) form), in the ship via code settings, you can specify the appropriate tax category that applies to freight. The list of taxes that apply to the freight includes the taxes that are present both in the tax category of the ship via code and in the tax zone of the branch that sold the goods.

If the goods are being shipped by an integrated carrier, the tax category is applied to only the amount of freight that exceeds the freight cost. The list of taxes applied to the specified amount consists of the taxes from both the tax category and the tax zone of the customer's delivery address (the specified tax zone of the customer location or, if one has not been specified, the tax zone automatically determined by the ZIP code of the delivery address). For details, see Taxable Sales with Freight Charges: Process Activity.

Sales Taxes on Sales Invoices

When a sales order is shipped, you create a related sales invoice, which you can view on the Invoices (SO303000) form. For these invoices, the system copies all the details from the associated sales orders. Sales orders with different tax zones cannot be added to the same invoice. When you mass-create invoices for multiple sales orders by using the Prepare Invoice action on the Process Orders (SO501000) form, the system groups the sales orders by tax zone.

Also, you can manually create invoices to bill customers for services rendered, or you can enter cash sales when the customer immediately pays for the services. You can create an invoice by using the Invoices and Memos (AR301000) or the Invoices (SO303000) form. Cash sales can be created on the Cash Sales (AR304000) form.

The system inserts the default tax zone for the accounts receivable or sales invoice or cash sale (displayed in the Customer Tax Zone box on the Financial tab of the applicable form), copying it as follows:

1. From the Revenue Tax Zone box on the Addresses tab of the Projects (PM301000) form, if the invoice or cash sale is related to a particular project, and the Calculate Project-Specific Taxes check box is selected on the Projects Preferences (PM101000) form.
2. From the tax zone specified for the opportunity on the Opportunities (CR304000) form if the order has been created from an opportunity that has a tax zone specified.
3. From the tax zone of the customer location specified on the document. Tax zones for customer locations can be selected on the Customer Locations (AR303020) form.
4. From the tax zone associated with the selling branch if no tax zone is specified for this customer location. If the Multibranch Support feature is disabled on the Enable/Disable Features (CS100000) form, the tax zone assigned to your organization on the Branches (CS102000) form is used.

If you know exactly which tax zone should be used on a specific invoice or cash sale document, you can override the default tax zone and select it in the Customer Tax Zone box.

On release of the sales invoice, the system generates a batch of the following general ledger transactions.

Tax Calculation with Specialized Third-Party Software

If your system is integrated with the AvaTax service of Avalara or another third-party tax calculation software, the applicable taxes are calculated by this service or software and recorded to the sales order or invoice when you save the document.

Once you remove a sales order or a sales invoice from hold, the system checks whether the customer location specified in the document is in the tax zone configured for the tax calculation software. If so, the system sends a request to the tax calculation software to determine the applicable taxes, based on the customer location address, entity code, available exemption certificates, and tax rules (if any). The tax amounts computed by the tax calculation software are sent to MYOB Acumatica and can be reviewed on the Taxes tab of the document entry form.

The way the system applies taxes depends on the settings of the origin (From) and destination (To) addresses specified in a document (sales order or invoice). For the addresses that are specified in the document header, the system inserts the address of the company branch (as specified on the Branches (CS102000) form) as the From address, and the address of the customer location specified in the document as the To address.

The system inserts the From and To addresses of each sales order line by using the following rules:

• If the customer picks up the ordered item directly from a warehouse (that is, if the Will Call check box is selected on the Shipping tab of the Sales Orders (SO301000) form), the system uses the From and To addresses of the warehouse selected in the sales order line, as specified on the Warehouses (IN204000) form.
• If the ordered item is shipped via a common carrier (that is, if the Will Call check box is cleared on the Shipping tab of the Sales Orders form), the system uses the warehouse address as the From address and the Ship-To address of the sales order as the To address.

In the lines of sales orders marked for drop-shipment, the system inserts the address of the default location of the warehouse as the From address. If the warehouse's address is empty, the system uses the address of the branch. The system inserts the Ship-To address specified in the sales order as the To address. In each related line of the drop-ship invoice, the system uses the vendor's location address in the related purchase receipt as the From address. The system inserts the Ship-To address in the related purchase order as the To address.

In a direct sales invoice, the system uses the From and To addresses of the warehouse selected in the sales order line, as specified on the Warehouses (IN204000) form.

In an sales invoice that was created from a sales order, on the Invoices (SO303000) form, the system uses the following rules to insert the from and ship-to information:

• In the document header, the system uses the address of the company branch as the From address, and the Ship-To address of the sales invoice as the To address.
• In the document lines, if the sales invoice was prepared from a sales order that requires shipment, the system uses the address of the warehouse specified in the line as the From address, and the Ship-To address of the shipment as the To address.
• In the document lines, if the sales invoice was prepared from an order that does not require shipment, the system uses the address of the warehouse or branch specified in the line as the From address, and the Ship-To address of the sales order as the To address.
• If the sales invoice was prepared for multiple shipments, for each line, the system uses the address specified for the line in the corresponding shipment.
  Note: If multiple shipments or sales orders with different addresses are included in the sales invoice, the system selects the Multiple Ship-To Addresses check box on the Address Details tab of the Invoices form.
• In a line added to the sales invoice without a link to sales order or shipment, the system inserts the address of the company branch as the From address, and the Ship-To address of the sales invoice as the To address.

For an overview of the integration with Avalara AvaTax and instructions on how to configure the integration, see Integrating MYOB Acumatica with External Tax Providers.

Disabled Calculation of Taxes on Sales Orders and Sales Invoices

If automatic calculation of taxes is configured in your system, MYOB Acumatica always calculates taxes when you create a sales order and recalculates taxes when you update the order (for example, when you adjust quantities in lines of a sales order or create an invoice or shipment for this order).

If you are using an e-сommerce system, you may want to calculate taxes in external tax calculation systems and then import them to MYOB Acumatica. In this case, you may have tax rates configured inaccurately in the system or not configured at all. If the taxes are not configured properly, the recalculation of taxes in the updated sales orders or invoices created for these orders can cause incorrect amounts to be posted to the general ledger in the system.

Also, you may need to adjust the tax rates manually in sales orders. When you update a sales order that has manually adjusted taxes or create an invoice for this order, the system by default recalculates taxes in the sales order and invoice.

To avoid issues with tax recalculation, you can disable the automatic calculation of taxes for the order types intended for e-сommerce sales by selecting the Disable Automatic Tax Calculation check box on the General tab (Order Settings section) of the Order Types (SO201000) form. When a sales order of this type is created on the Sales Orders (SO301000) form, the system does not calculate taxes for this order. If this sales order has manually specified taxes or taxes that were imported from an e-commerce system, taxes are not recalculated when you update the order.

For sales orders with the disabled automatic calculation of taxes, the Disable Automatic Tax Calculation check box is selected by default on the Financial tab (Financial Information section) of the Sales Orders form. You can change the state of this check box manually until at least one invoice is prepared for the sales order. When the sales order has at least one prepared invoice, the Disable Automatic Tax Calculation check box becomes unavailable for editing.

If you create multiple invoices for a sales order with the automatic calculation of taxes disabled,—that is, if you create a several partial shipments for the sales order with the Back Order Allowed option selected in the Shipping Rule box on the Shipping tab of the Sales Orders form and then prepare a sales invoice for each shipment—the whole taxable amount is transferred to the first created invoice.

If you add multiple sales orders to a single invoice, those orders must have the same state of the Disable Automatic Tax Calculation check box. In the Add Order dialog box on the Invoices (SO303000) form, the system displays only sales orders with the same state of the Disable Automatic Tax Calculation check box as the first sales order added to the invoice has.

In a sales invoice that is prepared for a sales order with the automatic calculation of taxes disabled, the system automatically selects the Disable Automatic Tax Calculation check box on the Financial tab (Tax Info section) of the Invoices (SO303000) form. This check box is always unavailable for editing.

The following limitations apply to this functionality:

• The functionality does not work with taxes that have the Inclusive Line-Level or Inclusive Document-Level calculation rule selected on the Taxes (TX205000) form.
• The functionality does not work if the Gross option is selected in the Tax Calculation Method box on the Financial tab of the Sales Orders (SO301000) form for the customer in the sales order while the Net/Gross Entry Mode feature is enabled on the Enable/Disable Features (CS100000) form.
• The feature is incompatible with the functionality provided by the Estimating feature of MYOB Acumatica Manufacturing Edition.