About Tax

You must create a separate tax code for each different type of tax you want to record. The tax codes you need to set up will depend on your country's legislation and how you and your customers are registered for tax purposes. Tax codes are defined at organization (org) level.

Example tax codes might be:

Tax Code	Description
PA-State	Pennsylvania State Sales Tax
MA-State	Massachusetts State Sales Tax
Philadelphia-PA-City	Philadelphia City Sales Tax
Boston-MA-City	Boston City Sales Tax

The Tax Codes tab displays a home page that lets you quickly create and locate your tax codes. You can also sort and filter your tax codes using standard and custom list views Give you instant access to specific sets of data. In addition to using existing views, you can create custom list views for the items most relevant to you.. In addition, this tab lets you view and edit detailed information on each tax code.

The Tax Code object is an org-level object Custom object that exists across all companies in an organization (org).. In FinancialForce Accounting, all companies in an organization A deployment of the Salesforce/FinancialForce applications with a defined set of licensed users. Your organization (org) includes all of your data and applications, and is separate from all other orgs. (org) share the same tax codes.

Note:

If your FinancialForce Accounting org is integrated with Avalara's AvaTax product for the calculation of tax you only need to create one tax code, as explained in Setting up External Tax Calculation. The tax value calculated by AvaTax will replace any tax values calculated internally by FinancialForce Accounting, or entered manually by users.

Tax Rates

The Tax Rates related list lets you set new tax rates for each tax code.

Example tax rates might be:

Start Date	Rate
05/20/2011	5.000%
10/01/2010	4.500%
01/31/2010	4.750%

Note:

Tax rates are preloaded when a new FinancialForce document new or edit page is opened. If you amend the applicable tax rate while a document is "In Progress", you must reload the page to apply the new rate before posting.

Tax Modes

The default tax code that is displayed on a sales or payable document depends on many factors, including the following configuration settings.

• The record type selected when you created the company: VAT, GST, Combined or SUT.
• The sales tax statuses set on both the account and product.
• In the case of VAT, GST or Combined, the value of the VAT/GST Group checkbox on the company record.

VAT/GST or Combined Mode: Sales Invoice or Sales Credit Note

1. If the account's tax status is "Home" or "EC Non-registered", the Output VAT/GST Code on the product is used as the default tax code for each line.
2. If one of the following is true, the Output VAT/GST Code on the account is used as the default tax code for each line:

   2.1 The account's tax status is "EC Registered" or "Export".

   2.2 The account's tax status is "Home" AND a VAT/GST Group exists (both the owner company and the account share the same VAT Registration Number and Tax Country Code AND the VAT/GST Group checkbox on the company is selected). See note.

3. If you do not enter an Output VAT/GST Code code on the account or product, the tax code stored on the company record is used instead.
4. If a tax code is unspecified at both company and product/account level, then there will be no default on the invoice or credit note line. In this situation, the person entering the document will have to provide a tax code at the time, or leave the field blank.
5. The tax rate is derived from tax code for the line, and the invoice date, then applied to the line net value to calculate the line tax value.

The result of each combination in 1 and 2 is summarized in the following table:

Sales Invoices/Sales Credit Notes

		Account Tax Status
		Home	EC Non-Reg	EC Reg	Export
VAT/GST Status	No Group	Rate applied as per defined tax code on the product	Rate applied as per defined tax code on the product	Rate applied as per defined tax code on the account	Rate applied as per defined tax code on the account
	Group Exists	Rate applied as per defined tax code on the account	Rate applied as per defined tax code on the product	Rate applied as per defined tax code on the account	Rate applied as per defined tax code on the account

VAT/GST Mode: Payable Invoice or Payable Credit Note (including Place of Supply and Reverse Charge)

Note: In the scenarios below, the Enable Reverse Charge checkbox is selected in the document header.

For default input tax codes:

1. If a VAT/GST Group exists (both the owner company and the account share the same VAT Registration Number and Tax Country Code AND the VAT/GST Group checkbox on the company is selected), the Input VAT/GST Code on the account is used as the default tax code for each line. See note.
2. If all of the following are true, the Input VAT/GST Code on the account is used as the default tax code for each line:
   2.1 No VAT/GST Group exists.
   2.2 The VAT/GST Reverse Charge checkbox is set to false.
   2.3 The VAT/GST Place of Supply on the product is set to "None" or "With Account".
   2.4 The vendor account's tax status is "EC Non-Registered", "EC Registered" or "Export".
   

In all other cases, the Input VAT/GST Code is retrieved from the product.

For default output tax codes:

1. If no VAT/GST Group exists and the VAT/GST Reverse Charge checkbox is set to true, the Output VAT/GST Code on the product is used as the default output tax code for each line.
2. If all of the following are true, the Output VAT/GST Code on the product is used as the default tax code for each line:
   2.1 No VAT/GST Group exists.
   2.2 The VAT/GST Reverse Charge checkbox is set to false.
   2.3 The VAT/GST Place of Supply on the product is set to "With Customer".
   2.4 The vendor account's tax status is "EC Non-Registered", "EC Registered" or "Export".

In all other cases, the Output VAT/GST Code is not retrieved.

The combinations available are summarized in the following table:

Payable Invoices/Payable Credit Notes

		Product		Account Tax Status
		VAT/GST Reverse Charge	VAT/GST Place of Supply Rules	Home	EC Non-Reg, EC Reg and Export
VAT/GST Status	No Group	Yes	With Account or With Customer	Input = product Output = product	Input = product Output = product
		No	With Account	Input = product Output = not retrieved	Input = account Output = not retrieved
		No	With Customer	Input = product Output = not retrieved	Input = product Output = product
	Group Exists	Yes or No	With Account or With Customer	Input = account Output = not retrieved	Input = account Output = not retrieved

Note:

For intercompany transactions, for a VAT/GST group to exist the Tax Registration Number and Tax Country Code must match in the sending company, in the receiving company and on the account. The account's tax status must be "Home" and the VAT/GST Group checkbox must be selected in both companies.

VAT/GST or Combined Mode: Payable Invoice or Payable Credit Note

Note: In the scenarios below, the Enable Reverse Charge checkbox is deselected in the document header.

1. If the vendor account's tax status is "Home", the Input VAT/GST Code on the product is used as the default tax code for each line.
2. If the account's tax status is "Home" AND a VAT/GST Group exists (both the owner company and the account share the same VAT Registration Number and Tax Country Code AND the VAT/GST Group checkbox on the company is selected), the Input VAT/GST Code on the account is used as the default tax code for each line. See note.

In all other cases, the tax code is retrieved from the account.

Payable Invoices/Payable Credit Notes

		Account Tax Status
		Home	EC Non-Reg, EC Reg and Export
VAT/GST Status	No Group	Rate applied as per defined tax code on the product	Rate applied as per defined tax code on the account
	Group Exists	Rate applied as per defined tax code on the account	Rate applied as per defined tax code on the account

Note:

For intercompany transactions, for a VAT/GST group to exist the Tax Registration Number and Tax Country Code must match in the sending company, in the receiving company and on the account. The account's tax status must be "Home" and the VAT/GST Group checkbox must be selected in both companies.

SUT Mode

For a sales invoice or sales credit note:

1. If the account and product's sales tax status is "Taxable", the tax codes set on the account are used to derive the tax rates for each product line on the invoice. This uses the rate in force on the invoice date.
2. If the account or product's sales tax status is "Exempt", the tax codes set on the account are used, but the rate for each one is set to 0.000%.
3. If the account's sales tax status is "Exempt for Qualifying Products", the tax codes defined on the account are used for qualifying products (those with a sales tax status of "Exempt for Qualifying Accounts"), but a tax rate of 0.000% is applied.
4. If the account's sales tax status is "Taxable" and the product's tax status is "Exempt for Qualifying Accounts", OR if the product's sales tax status is "Taxable" and the account's tax status is "Exempt for Qualifying Products" THEN the tax codes defined on the account are used to derive the tax rates for each product line on the invoice. This uses the rate in force on the invoice date.

The result of each combination is summarized in the following table:

		Account Sales Tax Status
		Taxable	Exempt	Exempt for Qualifying Products
Product Sales Tax Status	Taxable	Rate applied as per defined tax codes on the account	Rate applied as 0.000% using tax codes on the account	Rate applied as per tax codes on the account
	Exempt	Rate applied as 0.000% using tax codes on the account	Rate applied as 0.000% using tax codes on the account	Rate applied as 0.000% using tax codes on the account
	Exempt for Qualifying Accounts	Rate applied as per defined tax codes on the account	Rate applied as 0.000% using tax codes on the account	Rate applied as 0.000% using tax codes on the account

Note:

If your tax mode is SUT you cannot record tax information on payable documents.

Withholding Tax Codes

To use the Withholding Tax feature, you must create a Withholding Tax code and associated tax rate. This tax code and tax rate is used to withhold tax on:

• Payable credit notes
• Payable invoices
• Sales credit notes
• Sales invoices

Note: When the Withholding Tax Code is created it should be associated with your relevant Withholding Tax GLA.

For more information about creating General Ledger Accounts, see Creating General Ledger Accounts

For more information about Withholding Tax, see:

• Withholding Tax on Payable Credit Notes
• Withholding Tax on Payable Invoices
• Withholding Tax on Sales Credit Notes
• Withholding Tax on Sales Invoices

Multiple Tax Statuses on Account

You can define default tax information for multiple companies. Instead of retrieving the information from the Tax Status field on the Account object, this information is retrieved from the Tax Status field of the Multiple Companies Account Config custom object.

This can be applied to the following documents:

• Payable credit notes
• Payable invoices
• Sales credit notes
• Sales invoices

For this functionality you must ensure you have enabled the Multiple Companies Configuration feature. For more information, see Enabling Multiple Companies Configuration.