Tax by Table
Date Issued: 7/18/95 Version: All
Keywords: Sales Tax Multiple Included Taxes
SUBJECT:
Understanding the advanced tax, or Tax by Table, method available in POS? IM.
Note: In version 3.2 and greater, number categories were made to be unlimited.
DISCUSSION:
Two Taxing methods are available in POS? IM: Tax by Rate (Basic taxing), and Tax by Table
(Advanced Taxing). This technical note will address the Tax by Table Method.
Tax by Table, also known as Advanced Taxing, is the second method of charging taxes in
POS? IM. Tax by table is to be used when more than two tax rates are applicable, or when special
tax considerations are necessary. This method of taxing is more complex that the basic Tax by
Rate and should only be used when Tax by Rate will not satisfy tax requirements.
With Tax by Table, individual taxes are first defined with specific rates, percentages, and options
in Tax Detail cards. Once individual taxes are defined they are grouped together in Item Tax
Groups. Individual taxes are also grouped together in Customer Tax Districts to apply correct
taxes to different customer districts.
Each Item in the database must be assigned a tax code. The tax code is the ID of a previously
defined Item Tax Group. Customers in the database must be assigned a tax district from the list
of defined Customer Tax Districts.
When a Working Invoice is totaled, either by using the Total button or Post button, POS? IM
compares the Tax Detail cards listed on the Item Tax Group for the item, with the Tax Detail
cards listed for the Customer Tax District on the Customer card. Tax is calculated using the
matching cards.
Tax by Table must be selected in Sales? Point on the Set Tax Rate screen. A default Customer
Tax District must also be set. Select Invoice>>Tax by Table to complete the activation of Tax by
Table.
The following is a complete discussion of Tax, by Table, with a simple example.
The first step when using Tax by Table is to define each individual tax. Taxes are defined on the
Tax Detail card in Inventory. Select List >Tax Detail.
1
Su
Tax Detail ID - This is the identification for the tax being defined.
Description - This is the description for the tax being defined.
Taxing Authority - This is the name of the party responsible for the specific tax.
Payable Acct. Number - This is the general ledger account number for recording the
liability for sales tax collected for this specific tax.
Prepaid Acct. Number - This field is the general ledger account number for recording paid
Value Added tax.
Tax Rate - This amount is either a tax rate percentage or a fixed tax amount, depending on
the selection in the Tax Basis pop-up button. 5.75 = 5.75%
First Penny - This amount is the amount at which tax is first incurred. For example, if no tax is
charged on sales under 15 cents, then .15 would be the amount entered. (Tax will
be charged from 0.00 once the first penny amount has been surpassed in the sales
amount.)
Min. Taxable Amount - This amount represents a minimum amount that must be surpassed
in sales amount before the tax takes effect. For example, if a luxury
tax is incurred once a sales amount passes 100.00, then 99.99
would be the amount entered here. Tax will be charged from 0.00.
Max. Taxable Amount - This amount represents a maximum amount that once surpassed in
sales amount, the tax is no longer effective. For example, if tax
valid until sales amount reaches 100.00, then 100.01 would be the
amount entered here. Tax will be charged from 0.00 to 100.00.
Tax Rate - The tax can be a set amount, or a percentage based on this selection. Per
Unit = set amount. Percent = tax rate percentage.
Tax Basis - Set the basis for the tax. Selling price will calculate a tax based on the
amount of the price of the item on the invoice. Average Cost will base the
tax calculation on the Average Cost from the specific item.
2
Use Maximum - This option will honor or disregard the amount set the Max. Taxable
Amount.
Calculate By - Tax will be calculated based on either the total sales amount on the
Invoice, or strictly on the extended amount of the line where this tax
occurs.
Itemize on Invoice - Tax will be itemized with a description, or grouped together with all other
tax amounts on the printed Invoice.
Tax Included - If Yes is selected here, POS? IM will calculate tax as if it were included in
the selling price. For example, if the tax rate were .25, and the selling price
was 10.00, the invoice would charge 10.00 on the invoice as the selling
price, but the actual selling price would be 7.50 and 2.50 would be
allocated to sales tax. (This is useful for quick sale items where change
due is bothersome.) If No is selected, POS? IM will charge tax as a rate on
top of the full amount. (Tax Included report will break out total tax
amounts.)
Tax Exempt - If Yes is selected, the tax rate will be exempted from the total invoice tax.
If No, tax will be charged as normal. This option is only valid when using
Value Added Tax.
In this example, we will assume that we have three distinct taxes. These taxes will be grouped
into two Item Tax Groups. We also will create two Customer Tax Districts.
First we will define the individual taxes on the Tax Detail card. We have a state tax, one county
within the state has an extra tax, and an environmental tax, which is charged for petroleum based
goods. Open Inventory and select List>>Tax Detail. Define the first tax, in this example, the
state tax.
Once the first tax has been entered, click the + button to create a new card. Enter the information
for the county tax.
3
Continue by adding a new card and defining the EPA tax.
After the Tax Detail cards have been created, we will group the taxes together in specific Item
Tax Groups. Define two groups of taxes to accommodate the standard taxes and the additional
EPA tax for petroleum based products.
In Inventory, select List>>Item Tax Groups. Name the first Tax Item Group card “1”. Enter a
description for the group of taxes. In our example, we will group the state tax and the county tax
together as standard taxes. Click the Detail Code button and select the State tax and the County
tax.
4
We also need to create a group of taxes for those items that are subject to the EPA tax. Click the
+ button and title the new card “2”. Enter a description. Click Detail Code to add the State,
County, and EPA taxes.
Once Tax Item Groups have been established, we need to create Customer Tax Districts. In
Inventory, select List>>Customer Tax Districts. The first customer group, non-residents of the
county where the additional tax is charged, will be subject to the state tax and any EPA tax that
may be incurred in their purchase. Name the card Utah. Enter a description for the customer
group. Click the Detail button, select the state tax and the EPA tax.
Create a new card by clicking the + button. This card will include all taxes to be incurred by
residents of the county subject to the additional tax. Enter the name Davis. Enter a description.
Click the Detail Code button and select the State tax, the EPA tax, and the County tax.
5
Once Tax Detail, Item Tax Groups, and Customer Tax Districts have been defined, we will need
to assign a Tax Code to each of the items in the database. In Inventory, select List>>Item. The
s
Item Card has a field designated for each item’ tax code. Click the Choose button next to the
Tax Code field and select the appropriate Item Tax Group. The item will be taxed on the invoice
according to the taxes listed in the Item Tax Group assigned to that item.
Our first item is a book, which is subject to state tax, and depending on the customer, county tax.
Assign Tax Code 1.
The second item is tires. Because tires are petroleum-based goods, they are subject to the EPA
tax. Assign Tax Code 2.
6
After Tax Codes have been assigned to the specific items, quit Inventory and open Sales.
In Sales, select Misc>>Set Tax Rate. Set the sales tax calculation method pop- up menu to Tax,
by Table. Click the Default Tax District button and assign a default Customer Tax District (A
default district MUST be assigned. When a blank Working Invoice is created, the default Tax
District will be assigned for sales tax calculation). From the Invoice menu, select Advanced
Taxing.
Customer Cards must also have a tax district assigned when using Tax, by Table. Open the
Customers window by selecting the Customers icon in the navigation window, or select Lists>>
Customers. Locate the card for the appropriate customer(s). To assign a Tax District, click the
choose button to the right of the Tax District field. If the customer has a Tax District assigned,
s
when performing a transaction for him or her, the transaction’ Tax District will be automatically
assigned from the Customer Card.
7
Open a Working Invoice. Click the + button to create a new Working Invoice. Notice that the tax
district field on the invoice is defaulted to the district assigned in the Set Tax Rate screen. Click
the Cust ID button and select a customer from the list with a different tax district. The tax district
will change to the district assigned to that customer on the Customer Card.
Add Items to the invoice. As each item is entered the code in the Tax column will match the Tax
Code assigned on the Item Card. Click the total button, (or command - space-bar from the
keyboard) to see the calculated tax amount.
After posting invoices, sales tax can be reported by running the Sales Tax report in Inventory. If
taxes have been defined as Tax Included, the Tax Included report will break out the tax amount
from sales. The Till Totals Report will also display the total Tax, by Table amount.
8