Managing Customers Using Tax Regions

Configuration Process Adding Tax records Adding a new Tax Region Adding a new Tax Exemption Group Assigning tax records Assigning a Tax Region to a customer record Assigning a Tax Exemption Group to a customer record Example: Setting Up Tax Holidays for Specific Facilities and Items Tax Regions and Exemptions on Sales and Purchase Orders Sales Tax Reporting

Tax Regions define the Tax Rates and General Ledger accounts to which tax amounts will be posted. Once created, Tax Regions may be assigned to Facilities, Customers, Vendors, and/or Zipcodes within DEACOM. The Tax Regions tab on Bill-to and Ship-to Companies is used to establish Regions where sales to this customer are normally taxable. The Tax Regions set on the Bill-to record serve as the default when creating new Ship-to records associated with this Bill-to record. Likewise, the Tax Regions set on the Ship-to record serve as the defaults which will be entered on the Sales Order when entering orders for this Customer. Users may modify or remove the default Tax Regions on orders as required. DEACOM uses a sales tax hierarchy, detailed on the Processing Orders with Sales Tax page, to assign appropriate tax rates on sales orders.

When an order is entered in DEACOM, the system first checks to see if the selected Facility contains Tax Regions. If so, these regions and their corresponding rates will be applied to the appropriate Ship-to Customers and/or items specified on the order. If the selected Facility does not contain any Tax Regions, the system will then check to see if the selected Ship-to Customer contains Tax Regions and apply the appropriate rates. If the selected Ship-to does not contain Tax Regions, the final check will include the Zipcode, indicated on the corresponding Ship-to record.

Note that individual Ship-to Customers can be setup as tax exempt from Facility Tax Regions. Additionally, certain items may be included in Tax Exemption Groups, which are used to exclude Ship-to Companies from Sales Tax charges for certain items. This is usually because the customer has an exemption certificate based on the type of work they perform or to whom they might be re-selling the product to. The process begins with the creation of a Tax Exemption Group that is then assigned to a specific item or group of items in the system. Next, the Tax Exemption Group is assigned to the appropriate Ship-to Customers. Items may be assigned to a single Exemption Group, while Ship-to Companies can be assigned to multiple Exemption Groups.

Tax Regions are also available for use in the DEACOM eCommerce solution.

Configuration

There is no prior configuration required to enter or modify Tax Regions and Tax Exemption Groups. If assigning regions or exemption groups to Facilities, Customers, Vendors, Zipcodes, and/or Parts, then those items will need to be setup.

Process

Adding Tax records

Both Tax Regions and Tax Exemption Groups may be added or modified, depending on where products are sold and the tax laws the company abides by.

Adding a new Tax Region

1. Navigate to Accounting > Maintenance > Tax Regions.
2. Click the "Add" button to open the Edit Tax Region form.
3. Enter a Name for the region and select from the "Applies to" picklist to dictate wether this region will be used for Sales, Purchases, or both.
4. Select the appropriate GL Accounts for the tax to be applied to.
5. Enter a number in the "Rate" field as a percent.
6. Select an option from the "Type" pick list. "Sales" indicates that the Tax Amount will be based on the Sales Order price for each taxable item on the order. "Use" indicates that the Tax Amount will be based on the total inventory cost for each taxable item on the order.
7. Enter a value for the "Revenue Cap" and any Notes, if desired, then save and exit.

Adding a new Tax Exemption Group

1. Navigate to Accounting > Maintenance > Tax Exemption Groups.
2. Click "Add" to open the Edit Tax Exemption Group form.
3. Enter a Name then save and exit to add the new group.

Assigning tax records

Once Tax Regions and Tax Exemption Groups are added to DEACOM, they can be assigned to one or all of the following: Facilities, Customers, Vendors, and/or Zipcodes. The recommended method is to configure Zipcodes and add Tax Regions directly to Zipcode records. DEACOM automatically applies Tax Regions associated with a Zipcode to a customer or Vendor that has that Zipcode without the requirement to set up Tax Regions for that customer. This is particularly helpful for organizations that create multiple Ship-to Companies daily or weekly to avoid extra time when setting up customers.

• Note: Parts are eligible to be assigned to a Tax Exempt Group, but not a Tax Region.

Assigning a Tax Region to a customer record

If not using the Zipcodes table in DEACOM and Tax Regions have been created, they must be added to Ship-to Company records.

1. Navigate to Sales > Customers.
2. Select a Ship-to on the pre-filter then click "Modify".
3. Navigate to the Tax Regions tab and click "Add".
4. Select a region from the pick list then save and exit to assign the region to the customer.

Assigning a Tax Exemption Group to a customer record

Tax Exemption Groups may also be added to Ship-to Company records. If the Tax Exemption Group exists on the item and the Ship-to, then the item is exempt from tax for that customer. If the Exemption Group exists on either the item or customer, but not both, then the sales tax will be calculated.

1. Navigate to Sales > Customers.
2. Select a Ship-to on the pre-filter then click "Modify".
3. Navigate to the Tax Exemptions tab and click "Add".
4. Select a group from the pick list then save and exit to assign the group to the customer.

Example: Setting Up Tax Holidays for Specific Facilities and Items

The following steps can be used to setup a Tax Holiday for a specific Facility and/or Items. These steps can be performed ahead of the proposed Tax Holiday. Note that the first four steps should be completed during a Facility downtime.

1. Setup a Promotional Item Master record using the Designing a Part Numbering System and Creating Parts page for process steps.
   • When setting up the item, the item description should note that the item represents a Tax Holiday.
   • The item should also be flagged as Active, Non-Stocked, Non-Sales taxable, and Saleable in the Item Master Properties tab.
2. In the Chart of Accounts setup, temporarily switch the Account that records sales tax in the region with the Tax Holiday to a Revenue Account from a Liability Account referring to Configuring the Chart of Accounts for additional information.
3. Back in the Item Master for the Promotional Item, set the account switched in the previous step as the Revenue account in the Accounts tab. The reason for switching the account to a Revenue Account momentarily is that only Revenue Accounts can be selecting in this field. After it is selected as the Revenue Account, the system will simply post all sales revenue recorded against this part to this account regardless of the account type.
4. Return to the Chart of Accounts Maintenance form and switch the Account from the previous steps back to a Liability Account.
5. Once the Promotional Item is setup, Sales Promotions can be setup to specify the specific Facilities and items that will be included in the Tax Holiday, using the Creating Deal Pricing, Discounts, and Promotions page for process steps.
   • Make sure to specify the "Promo Item" as the Promotional Item previously setup.
   • The "Promo Type" should be percent off and the "Factor" should be set to the tax rate impacted by the Tax Holiday.
   • Also make sure that the "Start Date", "End Date", and "Facility" fields are properly set for each Promotional Code.

Note that a supplemental report will need to be added to the Sales Tax report in Accounting Reporting as the promotional item postings will not be shown in this report. An "Order Detail" report can be run from Sales > Order Reporting for the Promotional Item that will show the total deduction that can be made to the sales tax recorded during the Tax Holiday.

Sample Accounting Postings with Promo Item

Action	Account	Debit	Credit
Invoicing	A/R (from Sales + Tax)	$500
	Sales Revenue		$400
	Sales Tax Payable		$100
	Sales Tax Payable (from Promo Item)	$100
	A/R (from Promo Item)		$100

The bottom 2 transactions occur in the back end. The promotional item's postings are not displayed in the GL since they just subtract from the same accounts but are shown here for demonstration purposes.

Tax Regions and Exemptions on Sales and Purchase Orders

As indicated previously, Tax Regions can be assigned to Customers and Vendors within DEACOM. When a Customer or Vendor is selected during order entry, the system will populate the order with the default values from either one of these records. The Misc 2 tab on the order header contains the Tax Region fields. These values can be overridden, but in most cases this would be undesirable. The security settings "Sales orders -- change tax region" and "Purchase orders -- change tax region" control the ability to modify these fields.

• Note: eCommerce sales orders in DEACOM use Tax Regions when creating the order. 

When adding Parts that may be tax exempt, the system first checks to see if the items are assigned to Tax Exemption Groups and next checks if the Ship-to Company has been assigned to the same group. If the groups match, this item will be excluded for sales tax charges on the order.

• Note: Sales tax charges for Sales Orders are determined by the Tax Regions assigned to the Ship-to Company.

Sales Tax Reporting

DEACOM provides a Sales Tax report within Accounting > Accounting Reporting which provides details regarding the Gross Order Amount, Taxable Amounts, and finally the Actual Tax Amount. The report may be subtotaled in a variety of ways to assist with analysis and additional reporting requirements.