Sales tax overview

1. Sales tax overview This subject provides an outline of the excise tax system. It explains the weather of the sales tax setup and the way they work together. Summary The sales tax framework supports many sorts of indirect taxes, resembling sales tax, excise tax (VAT), merchandise and services tax (GST), unit-based fees, and withholding tax. These taxes are calculated and documented throughout purchase and sales transactions. Periodically, they have to be reportable and paid to tax authorities. The subsequent diagram shows the entities of the tax setup and the way they're related. For each excise tax that an organization should account for, a sales tax code must be outlined. A sales tax code stores the tax rates and calculation rules for the sales tax. Each sales tax code must be coupled to a sales tax settlement amount. Excise tax settlement periods define the intervals at that sales tax must be reportable and paid to the sales tax authority. Each sales tax settlement period must be allotted to a sales tax authority. A sales tax authority represents the entity that excise tax is reportable and paid to. It also defines the layout for the sales tax report. Excise tax authorities is regarding merchandiser accounts. For additional information, see created sales tax settlement periods. Each sales tax code should even be coupled to a ledger posting cluster. A ledger posting group specifies the most accounts that quantities for the sales tax codes will be announce to.

2. Ex gratia sales tax coverage codes may be defined. These can be allotted on sales tax codes for the varied amount varieties that are calculated for the sales tax code. The excise tax payment by code report shows totals per excise tax coverage code for a given sales tax settlement amount associated interval. Each group action that sales tax must be calculated and announce for must have a sales tax cluster and an item sales tax group. Excise tax teams are regarding the party (for example, client or vendor) of the transaction, whereas item sales tax groups are related to the resource (for example, item or procurance category) of the transaction. Tax groups contain a listing of tax codes. The tax codes that are gift in each the excise tax cluster and item sales tax group for a group action are the tax code that apply to it transaction. The subsequent table describes the entities and therefore the sequence for the tax setup. The following table describes the entities and the sequence for the tax setup. TABLE 1 Setup activity Create accounts. Required/Optional and description main Required. Before you can set up the sales tax functionality, the main accounts that the company uses to pay and record taxes must be created. ledger posting groups for sales tax. up Ledger posting groups for sales tax. Set up sales tax authorities. reported and paid to. For more information, see Set up sales tax authorities. Set up sales tax settlement periods. when and how often sales tax must be reported and paid. They are related to a sales tax authority. Set up sales tax reporting codes. codes to report amounts for multiple sales tax codes under one sales tax reporting code. For more information, see Set up sales tax reporting codes. Set up sales tax codes. rules for each sales tax. Sales tax codes are related to a sales tax settlement period and a ledger posting group. For more information, see Set up sales tax codes. Set up Required. Ledger posting groups define the main accounts for recording and paying sales taxes. For more information, see Set Required. Sales tax authorities are the entities that tax must be Required. Sales tax settlement periods contain information about Optional. Sales tax reporting codes can be assigned to sales tax Required. Sales tax codes contain the tax rates and calculation

3. TABLE 1 Setup activity Set up sales tax groups. Required/Optional and description Required. Sales tax groups contain a list of sales codes that apply for the party (customer or vendor) of a transaction. For a given transaction, the intersection of sales tax codes in the sales tax group and the item sales tax group determines the sales tax codes that apply to that transaction. Set up item sales tax groups. apply for the resource (product, service, and so on) of a transaction. For a given transaction, the intersection of sales tax codes in the sales tax group and the item sales tax group determines the sales tax codes that apply to that transaction. For more information, see Set up sales tax groups and item sales tax groups. Set up sales tax parameters on the application parameter pages. parameters have default values, they must be modified to fit each company's requirements. Required. Item sales tax groups contain a list of sales codes that Required. Different areas, such as General ledger, Accounts receivable, and Accounts payable, must set up parameters for correct calculation of indirect taxes. Although most of these Sales tax on transactions On every transaction (sales/purchase document lines, journals, and so on), you must enter a sales tax group and an item sales tax group to calculate sales tax. Default groups are specified in master data (for example, customer, vendor, item, and procurement category), but you can manually change the groups on a transaction if you must. Both groups contain a list of sales tax codes, and the intersection of the two lists of sales tax codes determines the list of applicable sales tax codes for the transaction. On every transaction, you can look up the calculated sales tax by opening the Sales tax transaction page. You can look up the sales tax for a document line or for the whole document. For certain documents (for example, vendor invoice and general journals), you can adjust the calculated sales tax if the original document shows deviant amounts. Sales tax settlement and reporting

4. Sales tax must be reported and paid to tax authorities at regulated intervals (monthly, quarterly, and so on). You can settle tax accounts for the interval and offset the balances to the tax settlement account, as specified in the ledger posting groups. You can access this functionality on the Settle and post sales tax page. You must specify the sales tax settlement period that sales tax should be settled for. After the sales tax has been paid, the balance on the sales tax settlement account should be balanced against the bank account. If the sales tax authority that is specified on the sales tax settlement period is related to a vendor account, the sales tax balance is posted as an open vendor invoice and can be included in the regular payment proposal. Conditional sales tax Conditional sales tax is a sales tax that is paid proportionally to the actual amount that is paid on an invoice. Conversely, standard sales tax is calculated at invoicing time. Conditional sales tax must be paid to the sales tax authority when the payment is posted, not when the invoice is posted. When the invoice is posted, the transaction must be reported on the sales tax book report. However, the transaction must be excluded from the sales tax payment report. If you select the Conditional sales tax check box in the General ledger parameters form, no sales tax can be deducted until you have paid the invoice. This is a legal requirement in some countries/regions. Note When you select the Conditional sales tax check box, you must set up sales tax codes and sales tax groups, and also create ledger posting groups, to support the functionality. | Example You settle sales taxes each month. On June 15, you create a customer invoice of 10,000, plus sales tax. The sales tax is 25 percent, or 2,500. The invoice payment is due July 30.

5. You typically would have to settle and pay 2,500 to the tax authority when the invoice is posted in June, even though you have not received the payment from the customer. However, if you are using a conditional sales tax, you settle with the tax authority when you receive the payment from the customer on July 30. Postdated check If you use postdated check as the payment method, when the payment is created, the bank account isn't cleared. In some countries, the VAT becomes 'realized' liability when the payment clears the bank, which means the postdated check is settled. You can enable it by selecting Realize the conditional tax when postdated checks are drawn in Cash and bank management > Setup > Cash and bank management parameters > Postdated checks. For More Information about AX Functional Finance & Operation online training Click Here Contact: +91 9704455959