Tax Calculation Methods: To Apply Taxes

The following activity will walk you through the process of applying the created taxes to a document.

Story

Suppose that you want to analyze how the taxes are calculated depending on the selected rule. You want to use the CANDYY customer to create a document for it and apply the taxes with different calculation methods to this document. (You do not need to save and release the document.)

Configuration Overview

In the U100 dataset, for the purposes of this activity, the CANDYY customer account has been configured on the Customers (AR303000) form.

Process Overview

In this activity, on the Invoices and Memos (AR301000) form, you will create an invoice with two lines and with the taxes of the TRAINING tax zone applied. You will remove and add the needed taxes on the Taxes tab, analyzing how the system calculated the taxes applied to the document.

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 an accountant Anna Johnson by using the johnson username and the 123 password.
  2. In the info area, in the upper-right corner of the top pane of the MYOB Acumatica screen, click the Business Date menu button and select 2/29/2024. For simplicity, in this process activity, you will create and process all documents in the system on this business date.
  3. On the Company and Branch Selection menu on the top pane of the MYOB Acumatica screen, make sure that the SweetLife Head Office and Wholesale Center branch is selected. If it is not selected, click the Company and Branch Selection menu button to view the list of branches that you have access to, and then click SweetLife Head Office and Wholesale Center.
  4. As a prerequisite activity, configure the tax zone, tax category, and taxes as described in Tax Calculation Methods: To Create Taxes.

Step 1: Creating an Invoice and Applying the INCLINELEVEL Tax

To create an invoice and apply a tax with the Inclusive Line-Level calculation method to it, proceed as follows:

  1. Open the Invoices and Memos (AR301000) 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:
    • Type: Invoice
    • Customer: CANDYY
    • Date: 2/29/2024 (inserted by default)
    • Post Period: 02-2024 (inserted by default based on the selected date)
    • Description: Calculation rules
  3. On the Details tab, add a row by clicking Add Row and then specifying the following settings:
    • Branch: HEADOFFICE (inserted by default)
    • Transaction Descr.: Taxable item sale
    • Ext. Price: 115.11
    • Tax Category: TRAINING
  4. Click Add Row and add another row, specifying the following settings:
    • Branch: HEADOFFICE (inserted by default)
    • Transaction Descr.: Taxable item sale
    • Ext. Price: 154.77
    • Tax Category: TRAINING
    Note: You do not need to save and release the invoice created in this activity.
  5. On the Financial tab, in the Tax Info section, select TRAINING in the Customer Tax Zone box.
  6. On the Taxes tab, remove the lines with the EXDOCLEVEL and EXLINELEVEL taxes by clicking Delete Row on the table toolbar, and leave the INCLINELEVEL tax; review the invoice.

    When the Inclusive Line-Level calculation method is selected, the system calculates the tax amount on each line and then adds the amounts. This method is based on the assumption that the Ext. Price of each line already includes the tax amount calculated by using the specified tax rate. The Taxes tab displays the total of taxable amounts and the total tax calculated for the document, which is the sum of the tax amounts for all lines of the document that are subject to tax. Based on the rule, the system calculates the tax of $12.85 for the document.

    The following table shows how the system calculates the taxes for the invoice.

    Table 1. Calculating taxes with the Inclusive Line-Level calculation rule
    Ext. Price = Taxable Amount + Tax Amount Taxable Amount = Round (Ext. Price / (1 + Tax Rate)) Tax Amount = Round (Taxable Amount * Tax Rate) Total = Line 1 + Line 2
    Line 1 115.11 115.11 / (1 + 0.05) = 109.628 ≈ 109.63 109.63 * 0.05 = 5.4815 ≈ 5.48
    Line 2 154.77 154.77 / (1 + 0.05) = 147.4 147.4 * 0.05 = 7.37
    Document 109.63 + 147.4 = 257.03 5.48 + 7.37 = 12.85 269.88

Step 2: Applying the EXDOCLEVEL Tax to the Invoice

To apply a tax with the Exclusive Document-Level calculation method to the invoice, proceed as follows:

  1. While you are still on the Invoices and Memos (AR301000) form with the created invoice open, on the Taxes tab, remove the INCLINELEVEL tax, and add a row with the EXDOCLEVEL tax. The row fills in with the respective details.
  2. Review the invoice details.

    When the Exclusive Document-Level calculation method is selected, the system calculates the sum of the line amounts to which the tax applies, and then calculates the tax amount based on the sum.

    The system has applied the EXDOCLEVEL tax to the invoice. The detail total ($269.88) is the taxable amount on which the tax is calculated. Based on the rule, the system calculates the tax for the document: $269.88 * 0.05 = $13.494 ≈ $13.49. The document's total amount is $283.37 ($269.88 + $13.49). The table below shows how the system calculates the taxes for the invoice.

    Table 2. Calculating taxes with the Exclusive Document-Level calculation rule
    Ext. Price Taxable Amount = Detail Total = Line 1 Ext. Price + Line 2 Ext. Price Tax Amount = Round (Detail Total * Tax Rate) Total
    Line 1 115.11
    Line 2 154.77
    Document Amount=Taxable Amount+Tax Amount 115.11 + 154.77 = 269.88 269.88 * 0.05 = 13.494 ≈ 13.49 269.88 + 13.49 = 283.37

Step 3: Applying the EXLINELEVEL Tax to the Invoice

To apply a tax with the Exclusive Line-Level calculation method to the invoice, proceed as follows:

  1. While you are still on the Invoices and Memos (AR301000) form with the created invoice open, on the Taxes tab, remove the EXDOCLEVEL tax, and add a row with the EXLINELEVEL tax. The row fills in with the respective details.
  2. Review the invoice details.

    When the Exclusive Line-Level calculation method is selected, the system calculates the tax amount on each line to which the tax applies and then calculates the sum of the tax amounts. The table below shows how the system calculates the taxes for the invoice.

    The system has applied the EXLINELEVEL tax to the invoice. The detail total ($269.88) is displayed as the taxable amount for the document; taxes are calculated separately for each line and then summed. Based on the rule, the system calculates taxes for each line: $115.11 * 0.05 = $5.7555 ≈ $5.76; $154.77 * 0.05 = $7.7385 ≈ $7.74. The total tax is $5.76 + $7.74 = $13.50. The document's total amount is $283.38 ($269.88 + $13.50).

    Table 3. Calculating taxes with the Exclusive Line-Level rule (EXLINELEVEL)
    Ext. Price Taxable Amount = Ext. Price Tax Amount = Round (Taxable Amount * Tax Rate) Total
    Line 1 115.11 115.11 115.11 * 0.05 = 5.7555 ≈ 5.76
    Line 2 154.77 154.77 154.77 * 0.05 = 7.7385 ≈ 7.74
    Document Balance = Taxable Amount + Tax Amount 269.88 5.76 + 7.74 = 13.50 269.88 + 13.50 = 283.38

    Notice that because of rounding, the tax amounts calculated for a document may vary from the total of tax amounts calculated for the document lines. You have to select the tax calculation method based on your needs and taxation rules.

  3. Close the form without saving your changes to the invoice, which was created solely for testing purposes.