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Chapter 5: Sales Tax Setup
CHAPTER 5: SALES TAX SETUP

Objectives
The objectives are: Provide an overview on sales tax. Create Ledger Posting Groups. Create Sales Tax Authorities. Create Sales Tax Settlement Periods. Create Sales Tax Codes. Create Sales Tax Codes Intervals. Create Sales Tax Groups. Create Item Sales Tax Groups. Set up Sales Tax Jurisdictions. Create Sales Tax Transactions. Create Sales Tax Exempt Data. Calculate and Post Withholding Sales Tax.
Introduction
The requirements for tax calculation and tax reporting differ significantly for different countries. Therefore, the tax module of a true international Enterprise Resource Planning (ERP) system must be comprehensive. In Microsoft Dynamics AX, the tax module offers many different options for: Tax calculation Posting Reporting
This content explores the extensive functionality for sales tax handling. NOTE: The labs in this chapter must be completed in order as they are dependent on the previous lab.
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Financials I in Microsoft Dynamics AX 2012
Sales Tax Overview

All businesses must collect and pay taxes to various tax authorities. Different countries have different rules and rates. In some countries, the rules differ between states or counties. This topic provides a general overview on taxes, with the focus on sales taxes, although the tax system in Microsoft Dynamics AX can process many kinds of taxes and duties. The sales tax system within Microsoft Dynamics AX functions as follows: The user specifies where to post sales taxes by entering a ledger account in the Ledger posting groups. The user specifies the sales tax authorities by using the Sales tax authorities form. The user specifies when and how frequently to settle under sales tax settlement periods. The user defines how much to collect or pay as a certain amount or percentage. The user sets this up under the Sales tax codes. The system determines whether a sales tax should be imposed on a sale or purchase order through a combination of the Sales tax group and the Item sales tax group.
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Sales Tax Overview - Suggested Steps
The image illustrates the steps for setting up tax information. If you follow the steps in this order, you can avoid going back and forth between dialog boxes in Microsoft Dynamics AX.
FIGURE 5.1 SALES TAX SETUP IMAGE
When you buy an item from a vendor or sell an item to a customer, the system must calculate all the applicable sales taxes. The calculated sales tax in Microsoft Dynamics AX is based on the sales tax codes included in both of the tax groups that are attached to the customer or vendor and the item.
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Sales Tax Overview- Example
The following table shows the: Sales tax setup for a customer and an item Attached tax groups and the associated tax codes
If you sell the item P Lamp to customer TTL Tire, the system calculates the sales taxes based on tax codes CA and Fed because those codes exist in both groups.
FIGURE 5.2 AFFECT OF SALES TAX CODES ON SALES TAX CALCULATION
When you attach settlement period and posting group to the tax codes, you specify how to post and pay the taxes. Finally, you can set up the tax reporting on the sales tax code.
Ledger Posting Groups

The ledger posting groups control the automatic posting of sales taxes in Microsoft Dynamics AX. You must create the accounts that General Ledger uses in the Chart of Accounts before using them to set up the ledger posting groups. The following characteristics apply to ledger posting groups: A ledger account is updated automatically when the system calculates taxes and updates invoice posting. The system attaches the ledger accounts that the taxes are posted in to the sales tax code. Because each ledger account can use several tax codes, a ledger posting group determines posting.
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Each ledger posting group can contain several ledger accounts. The help text indicates the purpose of each account and how it is used. You can set up ledger accounts that have the posting type Sales tax to select the accounts in the Account group form. Changes that you make to the ledger account numbers in Ledger posting groups only affect transactions that have not yet posted.
Ledger Posting Groups - Types of Accounts

The number of accounts you must set up depends on the use of the group and national law. For example, you can set up accounts for the following: Sales-tax payable Use-tax payable Settlement account Sales-tax receivable
Procedure: Create Ledger Posting Groups

Perform the following steps to create ledger posting groups: Go to General ledger, click Setup, click Sales Tax, then click Ledger posting groups. 1. Click the New button to create a new record. 2. Enter a unique name for the ledger posting group in the Ledger posting group field. 3. Enter a meaningful name to describe the ledger posting group in the Description field. The description appears on reports and other areas throughout Microsoft Dynamics AX. HINT: Describe the groups so that you can recognize them. This description appears with the code of the ledger posting group.
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4. Select the ledger account in the Sales tax payable list, where you must post the outgoing sales tax as part of the company's revenue. The system debits the outgoing tax in the customer account and then credits this account. Debits are automatically recorded in the account and settled upon payment of the taxes. The ledger accounts available in the Sales tax payable list are the posting type of sales tax in the Chart of accounts.
FIGURE 5.3 ACCOUNT GROUP- LEDGER POSTING GROUPS FORM
Create Ledger Posting Groups - Posting Example

The following is a brief example about posting sales taxes. These sales taxes are collected by the company on behalf of the tax authority when you sell taxable goods and services. The amount you receive includes the sales tax. For example, if a customer makes a purchase of 95.00 USD and the tax amount is 5.00 USD, the ledger transactions are as follows: Ledger account Customer account (Accounts Receivable) Sales tax payable* Sales account (domestic) Debit (USD) 100 5 95 Credit (USD)
* The sales tax payable line represents the ledger account specified in the Sales tax payable field on the Ledger posting group form. The system credits this account for sales tax amounts received from customers and debits the appropriate customer accounts.
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Procedure: Create Ledger Posting Groups - Sales Tax Receivable
Perform the following steps to create sales tax receivable ledger posting groups: 1. Select the ledger account for incoming taxes (receivable from the tax authority) in the Sales tax receivables field. Vendors collect these taxes on behalf of the tax authority when the company purchases taxable goods and services, and the amount paid to the vendor includes taxes. For example, if a vendor sends an invoice of 100.00 USD, of which 5.00 USD is value-added tax, the ledger transactions are as follows: Ledger account Vendor account (Accounts payable) VAT paid (Sales tax receivable)** Inventory account (Expense account) 5 95 Debit ($) Credit ($) 100
** This account represents the ledger account specified in this field. The system debits to this account the sales tax amounts that you pay vendors and credits the appropriate vendor accounts. 2. Enter the ledger account for posting deductible incoming taxes that vendors do not claim or report to the tax authority in the Use-tax expense list. NOTE: If the Apply US sales tax and use tax rules check box is selected on the General Ledger Parameters form on the Sales tax tab, the Sales tax payable field is unavailable. Instead, the system debits sales taxes paid to vendors as expenditures (costs) to the same accounts as the purchases.
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Procedure: Create Ledger Posting Groups - Use Tax Payable
Perform the following steps to create use tax payable ledger posting groups: Enter the ledger account that offsets the use tax expense for taxes that vendors do not claim in the Use tax payable list. The way you use this account depends on the type of tax system your company chooses. 1. Non-U.S. taxes - You must indicate a use tax expense account for the Ledger posting group. For any sales tax groups that contribute amounts to this ledger account, you must select the Use Tax field on the Setup tab on the Sales tax group form, found at General Ledger, Setup, Sales tax. 2. U.S. taxes - The amount in this account offsets the taxes posted as expenses if the Apply US sales tax and use tax rules check box is selected on the Parameters form. The vendor is not required to collect the tax. However, the company may still owe taxes to a sales tax authority and must track such taxes.
Create Ledger Posting Groups- Use Tax Payable Example

The following is an example of the use tax payable concept. A company buys office supplies on the Internet from an out-of-state vendor. The vendor charges 100.00 USD for the supplies and no tax. The company may still owe use taxes to the sales tax authority in its own state. The ledger transactions are as follows: Ledger account Vendor account (Accounts Payable) Use tax payable*** Office supplies (Expense account) 105 Debit (USD) Credit (USD) 100 5
***This account represents the ledger account specified in this field. NOTE: This field is visible only when the Apply U.S. sales tax and use tax rules check box is selected in the General ledger parameters form on the Sales tax tab.
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Procedure: Create Ledger Posting Groups Settlement
Perform the following steps to create settlement accounts for ledger posting groups: 1. Select the ledger account that the system debits when you pay taxes in the Settlement account field. To ease use, group the account with other ledger accounts in the Chart of accounts that contain posted taxes. The sum of these accounts is the total balance of taxes due. 2. Perform the following in the Ledger posting groups form: o Enter the ledger account for the posting of vendor cash discounts that include a sales tax amount. If you use this field, you must also select the Reverse sales tax on cash discount and Cash discount is calculated on amount incl. sales tax check boxes in the Parameters form. o Select the account for posting loss on cash discounts in the Customer cash discount list. You can use this account to view a more accurate audit trail on the transaction. The ledger posting groups have the following characteristics: They can be attached to individual sales tax codes They determine the ledger accounts to which the sales taxes calculated for the sales tax code are posted
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Lab 5.1 - Create a Ledger Posting Group

During this lab, you will set up ledger accounts and a ledger posting group for use in posting sales tax transactions. Scenario Phyllis is the Accounting Manager for Contoso. Contoso has a new customer in Alabama. A ledger account must be set up to record the sales tax liability and payments made (settlements) to the taxing authority in Alabama automatically. Phyllis asks you to perform these tasks for her. NOTE: The labs in this chapter must be completed in order as they are dependent on the previous lab.
Challenge Yourself!
1. Create an account to record the sales tax payable and the sales tax settlements for the Alabama customer. 2. Set up a new ledger posting group to assign to the Alabama customer to automate postings of sales tax transactions.
Need a Little Help?

1. When you create a new account for the sales tax liability for the Alabama customer, use account number 220105. 2. Create a new ledger posting group for the Alabama customer in the Ledger posting form that uses the Ledger posting group ALST (Alabama State Tax).
Step by Step
Set up the ledger account: 1. On the Navigation Pane, click General ledger, click Common, then click Main accounts. 2. Click the Main account button to add a line. 3. In the Main account field, enter 220105. 4. In the Name field, enter Alabama state sales tax payable. 5. In the Select the level of main account to display field, select Chart of accounts. 6. In the Main account type field, click the arrow to select Balance sheet. 7. Click the Setup FastTab. 8. In the Posting type field, click the arrow to select Sales tax. 9. Close the Main Accounts - Chart of accounts form.
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Set up the ledger posting group: 1. Click General ledger, then click Setup, then click Sales Tax, and then click Ledger posting groups. 2. Click the New button to add a line. 3. In the Ledger posting group field, enter ALST. 4. In the Description field, enter Alabama State Tax. 5. In the Sales tax payable field, click the arrow to select account 220105. 6. In the Settlement account field, click the arrow to select account 220105. 7. Close the Ledger posting groups form.
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Sales Tax Authorities

Companies pay and report taxes to authorities. The authorities determine when and where the company pays its taxes. Tax authorities can be countries, states, regions, and cities. You can pay sales tax through a vendor or to the sales tax authority directly. To pay sales tax through a vendor, specify the vendor's account number together with the correct sales tax authority. Sales tax payments are transferred by the system to the vendor making the payment. To make payments to the sales tax authority, enter the sales tax authority's address information.
Procedure: Create a Sales Tax Authority

Perform the following steps to create a sales tax authority: 1. Click General ledger, click Setup, click Sales tax, then click Sales tax authorities. 2. Click the New button. 3. Enter a unique code for the authorities that you send tax declarations and payments in the Authority field. Microsoft Dynamics AX uses this code throughout the system to refer to a particular authority. 4. Enter the name of the tax authority in the Name field. It displays on reports and in other areas throughout the system. NOTE: Give the tax authority a name that is easy to identify. The name displays together with the tax authority code.
5. Select the vendor to make tax payments to the appropriate authorities in the Vendor account list. The sales tax payments are then posted automatically to the settlement account specified in the Ledger posting group. If you leave the field blank, you must pay the tax authorities directly.
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6. Select the report layout to print for the tax authority in the Report layout list.
FIGURE 5.4 AUTHORITY FORM
Procedure: Create a Sales Tax Authority - General

Perform the following steps to create a sales tax authority, for fields on the General FastTab: 1. Select the vendor to make tax payments to the appropriate authorities in the Vendor account list. The sales tax payments are then posted automatically to the settlement account specified in the Ledger posting group. When you select a vendor, the vendor's address is entered automatically. If you leave the field blank, you must pay the tax authorities directly. 2. Select the report layout to print for the tax authority in the Report layout list. 3. Select the rounding form to use for rounding the sales tax amount in the Rounding form list. o Normal - round up numbers five and higher and round down numbers lower than five to the right of the specified unit. o Downward - round down any number to the right of the specified unit. o Rounding-up - round up any number adjacent to the specified unit. o Own advantage - round any number to the company's advantage. When the system settles sales tax, the total sales tax amount rounds automatically according to the setup on the sales tax authority. 4. Specify the general unit for rounding sales tax amounts in the Round-off field, according to the chosen rounding form.
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EXAMPLE: If you select Own advantage, with a Round-off of 0.10, the system rounds a figure of 10.16 to 10.10 and -10.16 to -10.20. This ensures that the rounding is always to the advantage of the company.
Procedure: Create a Sales Tax Authority- Address and Contact

Perform the following steps to create a sales tax authority, for fields on the Address and Contact information FastTabs: 1. On the Address FastTab, enter the address of the Sales tax authority. 2. Enter the remaining contact information on the Contact Information FastTab of the Sales tax authority. Create as many sales tax authorities as needed, each with specific address and contact information and report layout. The company can pay sales taxes to the authority directly or through a vendor account created for the sales tax authority. NOTE: If you have not set up the tax authority as a vendor, prepare a manual payment to the tax authority on the appropriate due date.
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Lab 5.2 - Create a Sales Tax Authority

During this lab you will demonstrate how to create a sales tax authority in Microsoft Dynamics AX. Scenario Phyllis, the Accounting Manager for Contoso, has asked for your assistance in setting up a sales tax authority. Contoso recently started conducting business with a customer in Alabama. A new sales tax authority must be set up to use to report sales taxes to the Alabama authorities. NOTE: The labs in this chapter must be completed in order as they are dependent on the previous lab.
Challenge Yourself!
Set up the Alabama sales tax authority. Use ALA for the authority name.
Need a Little Help?

1. Click General ledger, then click Setup, then click Sales tax, and then click Sales tax authorities. 2. Create a new sales tax authority. Contoso uses the field value "Normal" for the rounding method and it rounds to the nearest penny.
Step by Step
1. On the Navigation Pane, click General ledger, then click Setup, then click Sales tax, and then click Sales tax authorities. 2. Click the New button to add a new line. 3. In the Authority field, enter ALA. 4. In the Name field, enter Alabama Authorities. 5. Expand the General FastTab 6. In the Report layout field, click the arrow to select U.S. report layout. 7. In the Rounding form field, click the arrow to select Normal. 8. In the Round-off field, enter .01. 9. Close the Sales tax authorities form.
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Lab 5.3 - Create and Assign a Vendor to the Sales Tax Authority
To make paying the sales tax authorities more efficient, you can assign a vendor to the authority. During this lab you will assign a vendor. Scenario Phyllis, the Accounting Manager for Contoso, has discovered that assigning a vendor to a sales tax authority has the following advantages: She can make payments as a part of the typical payment routines. When she runs the Sales tax payment periodic job, the amount the company owes the sales tax authority transfers to the sales tax authority's vendor account. During the company's usual payment routine, the payment to the sales tax authority is created automatically with payments to other vendors.
To automate payments to the Alabama sales tax authority, Phyllis has asked you to set the Alabama sales tax authority up as a vendor. Use the following information for the vendor. Field Name Search name Group Terms of payment Method of payment Value State of Alabama AL tax 10 M15-Month end + 15 days USAUSD_CHK
NOTE: The labs in this chapter must be completed in order as they are dependent on the previous lab.
Challenge Yourself!
1. Create a vendor for Alabama sales tax. 2. Assign the vendor to the sales tax authority for Alabama.
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Need a Little Help?
1. When you add a vendor, Microsoft Dynamics AX can assign the vendor number because of the Accounts Payable setup in Contoso. Ensure that this setup is correct. 2. Assign the new vendor to the sales tax authority for the State of Alabama.
Step by Step
Set up the vendor: 3. On the Navigation Pane, click Accounts payable, click Common, click Vendors, then click All Vendors. 4. Click the New - Vendor button to add a record. In Contoso, because of accounts payable setup, the next available vendor number is assigned automatically. 5. In the Name field, enter State of Alabama. 6. In the Search name field, enter AL tax. 7. In the Group field, click the arrow to select 70- Tax Authorities. 8. Click the Payment FastTab. 9. In the Term of payment field, use the arrow to select M15. 10. In the Method of payment field, use the arrow to select USAUSD_CHK. 11. Close the Vendor form. Assign the vendor to the authority: 1. On the Navigation Pane, click General ledger, then click Setup, then click Sales tax, and then click Sales tax authorities. 2. Locate the line for Alabama Authorities. 3. In the Vendor account field, click the arrow to select State of Alabama. 4. Close the Sales tax authorities form.
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Sales Tax Settlement Periods

Sales tax settlement periods specify the intervals when the company reports and pays taxes. The company then can determine which sales tax settlement period to report to the authorities. The system automatically marks the posted tax transaction with the settlement period when it must report the transaction. NOTE: If the Include corrections field on the Sales tax tab page in the General ledger parameters form is selected, Microsoft Dynamics AX includes corrections from previous periods into the tax report for the actual period. Otherwise it is possible to manually select what information is included before running the report. Reporting periods depend on the size of the company, laws, and the authorities. Typical periods could be: Monthly Quarterly Yearly
Procedure: Create Sales Tax Settlement Period

Perform the following steps to create sales tax settlement periods. Click General ledger, click Setup, click Sales tax, then click Sales tax settlement periods. 1. Click the New button. 2. Enter a code in the Settlement period field that the system will use in the other forms to refer to the settlement period. For example, sales tax codes associate with a settlement period through the Settlement period field in the Sales tax codes form.
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3. Enter the name of the settlement period that appears on reports and in other areas throughout the system in the Description field.
FIGURE 5.5 SALES TAX SETTLEMENT PERIODS FORM
Procedure: Add Terms of Payment

Perform the following steps to set up terms of payments: 1. Click General ledger, click Setup, click Sales tax, then click Sales tax settlement periods. 2. Select a record. 3. Select the terms of payment for the sales tax settlement in the Terms of payment list. Create and manage terms of payment in the Terms of payment form in Accounts Receivable or Accounts Payable. 4. Select the tax authority that you report and pay taxes to for each settlement period in the Authority list. NOTE: The Terms of payment field, which is attached to the settlement period, only applies if a vendor account is set up on the sales tax authority. In this case, this payment term overrules any terms of payment set on the vendor in the Accounts Payable module. Also note that the Due date calculates based on the date set when you run Sales tax payment from General ledger > Periodic > Sales tax payment.
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Procedure: Specify Period length
Perform the following steps to set up period intervals for the sales tax settlement periods: 1. Click General ledger, click Setup, click Sales tax, then click Sales tax settlement periods. 2. Select a record. 3. Select the reporting interval in days, months, or years, in the Period interval list, on the General FastTab. 4. Enter the length of the settlement period in the Number of units field. Based on how you define the Period interval, the settlement period displays in days, months, or years. EXAMPLE: If the Period interval is set to Month(s) and the Number of units is set to 1, a new period automatically is one month. However, if the Period interval is set to Month(s) and the Number of units is set to 12, the length of one period is one year or 12 months. You can create new periods automatically by clicking New periods.
Procedure: Specify the Actual Periods

Perform the following steps to set up new Sales Tax Settlement periods for a already created Settlement Period record: 1. Click General ledger, click Setup, click Sales tax, then click Sales tax settlement periods. 2. Select a record. 3. To create a new period, click on the Periods FastTab, and then click the Add button. 4. Enter the first day and last day of a period interval in the From date and To date fields. You cannot change an updated period interval. This means that you cannot remove tax transactions from the original period interval. You can correct errors with an offset transaction that is identical to the original transaction, but with the opposite mathematical sign. 5. Add additional periods by clicking the New Period action.
Example: Create Sales Tax Settlement Periods

In the year 2011, Contoso settles its sales taxes every quarter. To create the first period, enter January 1, 2011 in the From date field and March 31, 2011 in the To date field. To create the other quarters of the year, click the Add button three additional times.
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CAUTION: The sum of period intervals must cover whole periods so that no tax transactions fall outside the calculation periods. Period intervals may not overlap.
Inquire about Sales Tax Settlement Periods

When you set up the sales tax settlement periods, you can inquire, report and pay sales tax for specific settlement periods. The Sales Tax Settlement Periods form contains several methods to inquire on Sales tax transactions: View the sales tax payments for a specific sales tax settlement period by selecting a sales tax settlement period and clicking Sales tax payments. Additionally, view sales tax payments for a specific period by selecting an interval on the Periods tab and clicking Interval sales tax settlements.
HINT: Click General ledger > Reports > External > Sales tax payments to print a report about all settled sales taxes. View posted sales tax transactions for a specific sales tax settlement period by selecting a sales tax settlement period and clicking Posted sales tax. This provides an overview of each sales tax transaction, which is posted in Microsoft Dynamics AX with a sales tax code. Alternatively, click Sales tax per interval to view posted sales tax transactions for a specific interval.
Use settlement periods to create and manage the periods the company uses to report sales tax.
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Lab 5.4 - Setup of Sales Tax Settlement Periods

During this lab you set up a sales tax settlement period. Scenario Ken, the Controller for Contoso, wants April, the accounts payable coordinator, to pay Contoso's Alabama sales tax liability quarterly. The sales tax authorities expect settlement 15 days after the close of the quarter. The sales tax settlement period and deadlines are laid out in the following table: Settlement period January 1 - March 31 April 1 - June 30 July 01 - September 30 October 1 - December 31 Deadline for reporting April 15 July 15 October 15 January 15, the following year
April has asked for your assistance in completing the setup for the Alabama sales tax settlement so that April can generate the tax payments automatically. NOTE: The labs in this chapter must be completed in order as they are dependent on the previous lab.
Challenge Yourself!
Set up the required sales tax settlement for Alabama.
Need a Little Help?

1. 2. 3. 4. Create the Sales tax settlement period. Attach the Terms of payment to the settlement period. Set up the Period length. Create the individual Settlement periods.
Step by Step
Set up the Tax Settlement: 5. On the Navigation Pane, click General ledger, click Setup, click Sales tax, and then click Sales tax settlement periods. 6. Click the New button to insert a line. 7. In the Settlement period field, enter AL. 8. In the Description field, enter Alabama Quarterly. 9. Expand the General FastTab.
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10. In the Authority field, click the arrow to select ALA-Alabama Authorities. 11. In the Terms of payment field, use the arrow to select N015. 12. In the Period interval field, use the arrow to select Months. 13. In the Number of units field, enter 3. Set up the Periods tab: Click the Periods tab. Press Add button to add a line, if needed. In the From date field, enter 01/01/2011. In the To date field, enter 03/31/2011. Click the New Period action three additional times to create the remaining quarters. 6. Close the Sales tax settlement periods form. 1. 2. 3. 4. 5.
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Sales Tax Codes

The Sales tax code is a central part of the setup. It specifies the following: How taxes are calculated The value that is used for tax calculation
The sales tax value is very important because no tax is calculated without it. A sales tax code includes information about the following: How the tax is calculated, posted and reported When the payments are made To whom the payments are made
You can define the sales tax rate for the following: Various intervals and periods in Values Limits on sales tax amounts in Limits
Sales Tax Codes - When to Create

Create sales tax codes when you initially set up the system. Update the sales tax codes when you need to make changes to existing taxes or when you add new taxes. Because taxes frequently depend on geographic location, changes to the company's market can result in the need for new sales tax codes. NOTE: If a company operates in the United States, it is highly recommended that you set up sales tax jurisdictions, as well as sales tax codes. You must attach sales tax jurisdictions to sales tax groups. You can attach sales tax codes to the sales tax group through the sales tax jurisdictions.
Procedure: Create a Sales Tax Code - Overview

Perform the following steps to create a sales tax code: 1. Click General ledger, click Setup, click Sales tax, then click Sales tax codes 2. Click the New button to create a line for the new sales tax code. 3. Enter a unique identifier for the sales tax code in the Sales tax code field. This is the basis for calculation of tax, purchase duty, and packing duty throughout the system. 4. Enter a meaningful name for the new sales tax code in the Name field. This describes the function of the code and appears on reports and throughout the system.
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NOTE: If a company operates in the United States, set up sales tax jurisdictions in the Sales tax jurisdiction list.
FIGURE 5.6 SALES TAX CODES FORM
Procedure: Create a Sales Tax Code - General

Perform the following steps to enter general information when creating a sales tax code: 1. Click the General tab. Select the currency in which tax must be calculated and paid in the Sales tax code form on the General tab in the Currency list. If the original transaction is in another currency, the tax converts automatically 2. Select the period and the sales tax authority used to calculate the sales tax code in the Settlement period list. 3. Select the ledger posting group for a sales tax code in the Ledger posting group list. The posting group contains information about which accounts to use when the sales tax amounts are automatically posted in the General Ledger. You can create the posting groups in the Ledger posting groups form. 4. Select whether a user-defined code or the sales tax rate should print with the sales tax specifications in invoice documents by making a selection in the Print field on the General tab. 5. Define an identifier that specifies the sales tax code on printed invoices in the Print code field, but only if Print code is selected in the Print list. The sales tax code identifier is an alphanumeric string that may include special characters. 6. Enter a Packing duty Sort code to help identify the packing duty.
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7. Select the Negative sales tax percentage check box to allow a negative tax percentage for the sales tax code. This feature, can be used when a legal entity must retain tax (for example IRPF Impuesto sobre la Renta de las Personas Fsicaspersonal income in Spain) from vendors, and pay this amount to the sales tax authorities. 8. In the Payment sales tax code field, select a sales tax code to which sales taxes are posted when invoices are settled with payments. This setting is used for unrealized sales tax when a sales tax is calculated at time of invoicing but will be due (realized) for payment to the tax authorities only at the time when the invoice has been paid. The sales tax rate must be the same sales tax rate that you entered in the Sales tax code field. NOTE: For the transfer to occur, set up the general ledger to allow the posting of conditional sales taxes. In the General ledger parameters form, select the Conditional sales tax check box.
Procedure: Create a Sales Tax Code - Calculation

Perform the following steps to enter calculation information when creating a sales tax code: 1. Click General ledger, click Setup, click Sales tax, click Sales tax codes, then click the Calculation FastTab. 2. Select from the following options in the Origin list: o Percentage of net amount - percentage of purchase or sale, excluding any other taxes. o Percentage of gross amount - percentage of purchase or sale, including any other taxes. Sales tax calculates as a percentage of the purchase or sale amount. This includes all other taxes or duties. o Percentage of sales tax - percentage of another tax. The tax code that this calculation is based on must exist in the system. On the Calculation tab, set up the specific sales tax code that you based the current sales tax code on, in the Sales on sales tax field. o Amount per unit - indicate the unit on which the sales tax will be calculated in the Unit field. If the transaction is in another unit, it converts automatically based on Unit conversion in Inventory. o Calculated percentage - of the net amount -the calculated percentage of net amount calculation method can be used to calculate input tax deduction for per diem expenses (as used for example in Germany).
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3. On the Calculation tab in the Unit list, select the unit to use when taxes are calculated. If the transaction is expressed in another unit, it converts automatically according to the Unit conversion. NOTE: If the basis for tax is the number of units, this Unit field is mandatory.
FIGURE 5.7 SALES TAX CODE CALCULATIONS
Procedure: Create a Sales Tax Code - Calculation Rounding Options

Perform the following steps to set up rounding when you create a sales tax code: 1. Click General ledger, click Setup, click Sales tax, click Sales tax codes, then click the Calculation tab. 2. Enter the lowest absolute value of a calculated tax on the Calculation tab in the Round-off field. For example, if taxes should round off to a unit that is 1/100 of the currency of the tax, enter the value as a decimal (0.01). The Rounding form field indicates the kind of rounding to use. Refer to the following table for rounding on the amount 98,765.435 USD with different rounding values set up. Round-off = 0.01 98,765.43 Round-off = 0.10 98,765.40 Round-off = 1.00 98,765.00 Round-off = 100.00 98,800.00
NOTE: There is no requirement that the value be less than 1. If the value must round to the nearest 10, enter 10.00 in the field.
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Procedure: Create a Sales Tax Code - Calculation Packing Duty
Select the Packing duty check box to specify that the sales tax code is a packing duty. You can only select this check box when the Amount per unit option is selected in the Origin field. When you convert a unit of measure, the unit that it is converted to depends on whether or not this field is selected. If this check box is selected, the unit of measure is converted to the unit of measure of the product as shown in the Unit field in the Product per company details form. If this check box is clear, the unit of measure is converted to the unit of measure displayed in the Unit field in the Sales tax codes form.
Select the Calculate before sales tax check box to calculate and add a duty or tax to the net amount before sales tax is calculated. For example, you could calculate a duty and a sales tax on the same transaction, and add the duty amount to the net amount before the sales tax is calculated. Example: In the Origin field, Percentage of net amount is selected. The net amount is 100.00. The purchase duty is 10.00. The sales tax is 25 percent. The Calculate before sales tax check box is selected. The sales tax is calculated as (100 + 10) x 25% = 27.50. The total amount is 127.50.
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Procedure: Create a Sales Tax Code - Additional Calculation Options
Perform the following steps to set up additional calculation options when you create a sales tax code: 1. Click General ledger, click Setup, click Sales tax, then click Sales tax codes 2. Click the Values button on the action bar. Enter the Percentage/Amount in the Values form. Enter Values to set up the sales tax rate. Also refer to the procedure on how to create sales tax codes intervals. Close the Values form.
Procedure: Create a Sales Tax Code- Report Setup

Perform the following steps to create sales tax codes: 1. Click General ledger, click Setup, click Sales tax, click Sales tax codes, then click the Reports Setup FastTab or click the Report setup- credit note FastTab. 2. Insert the Reporting code numbers to facilitate reporting on the Report setup and Report setup - credit note tab pages. Frequently the tax authorities have special forms with numbered cells for reporting of taxes. For example, in the Taxable sales list, you can select the number of the field in the tax report that contains taxable sales. A series of forms exists within Microsoft Dynamics AX, which contains numbered cells that you can report to various authorities. The sales tax code is included in these reports in the cell indicated in this field.
FIGURE 5.8 SALES TAX CODE REPORT SETUP
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Rounding and Report Setup Notes
NOTE: Click General ledger > Reports > Base data > Sales tax codes to print a report listing all the sales tax codes. NOTE: In the Parameters form (click General ledger, click Setup, click General ledger parameters, then click the Sales tax link in the navigation pane), select the Calculation date type to determine the date that sales tax calculates. In the Method of calculation list, select whether the sales tax should calculate for each line or the total amount.
Example Setup: Calculation Methods for Sales Tax Codes

The following is an example showing a sample setup for sales tax codes: Scenario: Phyllis is the Accounting Manager at Contoso. Contoso's customer base includes many international customers. To increase the understanding of sales tax, Phyllis is asking your assistance in reviewing the calculation of sales tax by using various options available in Microsoft Dynamics AX. The following table shows Phyllis's review of setups in Contoso: Setup 1 - Use percentage of amount Duty 1 Duty 2 Percentage of net amount Percentage of net amount Percentage of gross amount Setup 2 - Use percentage of sales tax Percentage of net amount Percentage of sales tax (Duty 1 in the sales tax on sales tax list) Percentage of gross amount Rate
10% 20%
Sales Tax Calculation
25%
Example Setup: Calculation Methods for Sales Tax Codes- Incomplete Table
How would you apply the information in the table above to determine the effect of each setup on an invoice for 10.00 USD by completing the following table with the provided information? Setup 1 Rate Duty 1 Duty 2 10% 20% Formula Calculation Setup 2 Formula Calculation
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Setup 1 Gross Amount Sales Tax Calculation Duty + Sales Tax Total Sale The completed table is shown in the next lesson section. 25% Setup 2
Example Setup: Calculation Methods for Sales Tax Codes- Completed Table
The completed table is as follows: Setup 1 Rate Duty 1 Duty 2 Gross Amount Sales Tax Calculation Duty + Sales Tax Total Sale 25% 10% 20% Formula $10 * 10% $10 * 20% $10+1+2 $13 * 25% $1+2+3.25 $10 + 6.25 Calculation $1.00 $2.00 $13.00 $ 3.25 $ 6.25 $16.25 Setup 2 Formula $10 * 10% ($10+1)* 20% $10+1+2 .20 $13.20 * 25% $1+2.20 +3.30 $10 + 6.50 Calculation $1.00 $2.20 $13.20 $ 3.30 $ 6.50 $16.50
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Sales Tax Codes Intervals

Use Microsoft Dynamics AX to specify the following: The sales tax rates to use in different intervals A lower and upper amount limit for sales tax calculations
Sales taxes lower than the minimum limit amount are not recorded, and sales taxes over the upper limit amount are set to the upper limit amount automatically. You can attach the limits to specific dates. The sales tax code defines the limits. Changes to minimum and upper limits do not affect sales tax that is already updated and posted.
Procedure: Create Sales Tax Codes Intervals - Effective Dates

Perform the following steps to set up the From date and To date field in sales tax code intervals, both Limits and Values: Click General ledger, click Setup, click Sales tax, click Sales tax codes, then click the Limits OR click General ledger, then click Setup, then click Sales tax, then click Sales tax codes, then click the Values button. 1. Enter the first date the tax limits apply in the From date field. NOTE: The previous limits are visible because they are not overwritten when users make changes. 2. Enter the last date the tax limits apply in the To date field. 3. With From date and To date fields, indicate a period that the calculated tax applies to. The posting date determines when the tax falls outside the given period.
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If you have made changes to the limits, close the old period to indicate an ending date in the To date field and create a period with a new starting date in the From date field. Extend the old period by changing the date in the To date field. You can change the limits taking effect at a later date.
FIGURE 5.9 SALES TAX LIMITS
Procedure: Create Sales Tax Codes Intervals - Minimums and Maximums

Perform the following steps to set up the minimums and maximums in sales tax code intervals in the Limits form: 1. Enter the lower sales tax limit in the Minimum sales tax field. If the tax is lower than this minimum amount, it is reduced to zero automatically. The amount in this field must be the same currency as the currency specified in the sales tax code. 2. Enter the upper sales tax limit in the Maximum sales tax field. If the tax is more than the amount indicated, it is adjusted automatically to match this amount. The amount in this field must be the same currency as the currency specified in the sales tax code.
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Perform the following steps to set up the field in the Values form: 1. In the Values form, specify a sales tax rate for the different intervals. 2. In the Value field, define the tax percentage, or amount for each unit. If the basis for the calculation of tax is an amount, the entry in the Value field on the Overview tab of the Values form is the percentage value used in the calculation. 3. If the basis is several units, such as Purchase duty or Packing duty, the entry in the Value field on the Overview tab of the Values form is the amount for each unit used in the calculation. You can define units by using the Unit field found on the Calculation tab on the Sales tax codes form.
Sales Tax Code Intervals- Values Versus Limits

For a sales tax code, Values define the tax to calculate, on either a percentage or amount per unit, based upon the effective interval dates and the minimum and upper limits. These minimum and upper limits are the minimum and upper sales amount to which the amount entered in the Value field applies. For a sales tax code, Limits define the tax to calculate, based upon the effective interval dates and the minimum and maximum sales tax. These minimum and maximum sales tax limits are the minimum and maximum sales tax that will be calculated on the sale, after all tax calculations are performed.
Procedure: Create Sales Tax Codes Intervals - Marginal Base Options

Perform the following steps to set up the marginal base options in sales tax code intervals: 1. In the Sales tax code form on the Calculation FastTab, select the origin for the sales tax limits in the Marginal base list. 2. Select from the following options: o Net amount per line - value of the line, excluding any other taxes. o Net amount per unit - value of the unit, excluding any other taxes. This can involve the unit price specified by using a unit in the Unit field. o Net amount of invoice balance - the total value for the invoice, excluding any other taxes. o Gross amount per line - value of the line. This includes any other taxes. You can include only one tax code with this or the next property in the individual calculation.
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o Gross amount per unit - value of the unit. This includes any other taxes. You can include only one tax code with this or the previous property in the individual calculation. Invoice total incl. other sales tax amounts - The total value for the invoice. This includes any other taxes. You can include only one tax code with this property in the individual calculation.
Procedure: Create Sales Tax Codes Intervals - Method of Calculation

Perform the following steps to set up the method of calculation in sales tax code intervals: 1. Select the origin for the sales tax limits in the Method of calculation, in the Sales tax code form on the Calculation tab. 2. Select from the following options: o Whole amount - the sales tax calculates for the whole amount, which the tax rate for the interval that includes the transaction determines. Interval - the base is divided into intervals. The part within a given interval is calculated automatically based on the tax rate for that interval.
NOTE: Click the Inquiries button > Included in sales tax groups or Included in item sales tax groups to view or attach sales tax codes to sales tax groups or item sales tax groups. Click the Inquiries button > Posted sales tax to display posted sales tax transactions for a sales tax code and an itemization of each tax. Use this function for inquiries and error detection. In the Sales tax transactions form, click Voucher to view related ledger transactions. Click the Recalculate tax button to recalculate taxes on unposted transactions if the settings of a sales tax code have been modified.
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Lab 5.5 - Set Up Sales Tax Codes Intervals

During this lab you get to practice setting up sales tax code intervals. Scenario Ken, the Controller for Contoso, has received a notification from the State of Florida that as of 07/01/2011, a tiered tax is due on video recorder sales. Ken asks for your assistance in setting up tax codes that comply with the new structure. The notice specifies the following rates: Minimum limit 0.00 50.001 100.001 Maximum limit 50.00 100.00 Tax rate 10% 9% 8%
Challenge Yourself!
1. Use sales tax code intervals to structure the AV_FLST tax rate in Microsoft Dynamics AX for the new rates. 2. Microsoft Dynamics AX will require an 'ending' date for the tax. Plan to enter an artificial date of 12/31/2020.
Need a Little Help?

1. Before you add a new line to the Values form, you must enter dates on the existing line. Suggested dates are 1/01/2006 - 6/30/2011. 2. Add the lines to the Values form. All of them will be assigned the same date range assigned.
Step by Step
Edit the State of Florida Tax code record: 1. On the Navigation Pane, click General ledger, then click Setup, then click Sales tax, and then click Sales tax codes. 2. Locate the line for AV_FLST. 3. Click the Values button.
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Edit the existing line by adding dates: 1. 2. 3. 4. 5. 6. 7. 8. In the From date field, enter 01/01/2006. In the To date field, enter 06/30/2011. Click the New button to add a line. In the From date field, enter 07/01/2011. In the To date field, enter 12/31/2020. In the Minimum limit field, enter 0.00. In the Upper limit field, enter 50.00. In the Value field, enter 10.00.
Create the rest of the lines: 1. Click the New button to add a line. 2. Repeat steps 1 through 8 to add the remaining tax intervals to the form. 3. Close the Values form. 4. Close the Sales tax codes form.
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Sales Tax Groups

A sales tax group includes all sales tax codes that apply when you trade goods or services with customers and vendors. In most countries, different tax rules apply when you trade with domestic and foreign customers. The tax rules for foreign trade frequently are split up based on bilateral and multilateral trade agreements. Therefore, you must create tax groups depending on the taxes that may apply for a certain group of customers or vendors. A careful analysis of the different types of customers and vendors that the company trades with is a good starting point for determining the types of Sales tax groups needed, and the setup of those Sales tax groups.
Sales Tax Groups - Example Comparison

If your company needs the following tax codes, here is an example of how to apply sales tax codes to a sales tax group: VAT (only applies for domestic customers) Export Tax (only applies for foreign customers) Environmental duty (applies to all customers)
In a table, the tax codes appear as follows: Domestic customers VAT Export Tax Environmental Duty Yes No Yes Foreign customers No Yes Yes
The two groups of customers (domestic and foreign) do not have identical tax needs. Therefore, you must create two different sales tax groups that reflect the differences: Foreign customers: this group would contain the Export Tax and Environmental Duty tax codes Domestic customers: this group would contain the VAT and Environmental Duty tax codes
After you create the sales tax groups, attach the appropriate sales tax group to: Customers Vendors Ledger accounts
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Procedure: Create a Sales Tax Group
Because the geographic location of the customer or the supplier determines taxes, you usually assign the same Sales tax group to similar trading partners in the system. The correct tax codes used by the system are attached to this Sales tax group. The Sales tax group then associates with customer information specified in the Sales tax group field found on the Setup tab in the Customers form. Perform the following steps to create a sales tax group: 1. Click General ledger, click Setup, click Sales tax, click Sales tax groups, then click the New button. 2. Enter a unique name for the sales tax group in the Sales tax group field. 3. Enter a name that identifies the sales tax group in the Description field.
FIGURE 5.10 SALES TAX GROUP FORM
Procedure: Create a Sales Tax Group - General Information

Perform the following steps to set up additional fields in Sales tax groups: 1. Click General ledger, click Setup, click Sales tax, click Sales tax groups, then click the General FastTab. 2. Enter a form of identification to identify a sales tax group based on specific criteria, such as country, state, or county, in the Country/State and County/Purpose fields. This provides another method to identify the group.
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3. Select the Reverse sales tax on cash discount check box to reverse sales tax on a cash discount. States in the United States have different requirements, so you must set up this information on the sales tax group. When you create a sales tax group, the selection in the Reverse sales tax on cash discount field in General ledger parameters defaults to the field. 4. Select Sales tax setup section, select a code in the Sales tax group setup list. If the company is located in a country with sales tax jurisdiction, select the Sales tax jurisdictions value. NOTE: If the Sales tax jurisdictions value is selected in the Sales tax group setup list, a new tab called Jurisdictions setup appears and you cannot add sales tax codes to the Sales tax group.
Rounding By- Additional Information

The following is additional information on the General FastTab in the Sales tax group form. The Rounding by field controls the rounding principle that applies to the taxes of the sales tax group. This field is available if your company configuration includes sales tax jurisdictions. The two kinds of rounding that you can select that apply to the sales tax group are: Sales tax codes rounding is according to the sales tax code roundoff. You can see the value in the Round-off field on the Calculation tab of the Sales tax codes form. Sales tax code combinations - rounding is according to the sales tax code combination that is attached to each invoice line.
Printing Taxes on Invoices

Select the way you want the sales taxes to appear on the printed invoice by selecting one of the following in the Invoicing - Print field. Sales tax codes the sales taxes are shown by sales tax code. Sales tax groups the sales taxes are shown by sales tax group. No details no sales tax details are shown on the invoice. This option is a logical selection for sales tax groups that are based on sales tax jurisdictions for which you have selected the Exempt check box on the Jurisdiction setup tab.
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Recalculating Taxes on Unposted Transactions
After changing the settings of a Sales tax group you can click Recalculate taxes on all transactions with the modified Sales tax group or all unposted transactions.
Procedure: Create a Sales Tax Group - Setup

Perform the following steps to set up additional tax codes with this Tax Group: 1. Click the Add button to create a new tax code line. 2. Select one or more sales tax codes to use with the sales tax group. The fields on the Setup tab automatically fill in with values from the Sales tax codes form. 3. Select the Use-tax check box to indicate whether the company is responsible for calculating and paying use-tax on the purchase. If the company is not responsible, the vendor calculates and pays the tax. If the vendor did not charge tax, the system credits the tax to the account shown in the Use-tax payable field in Ledger posting groups. How the tax is debited depends on how you set the Apply U.S taxation rules parameter in the General Ledger parameters. If the Apply U.S. taxation rules parameter option is selected in General ledger parameters , the tax posts to the same account as the expense. If the option is not selected, the tax posts to the account specified in the Use-tax expense field in Ledger posting groups, there are no deductions for taxes on purchases and the tax posts together with the expense. The value is entered automatically from the Use-tax field in Sales tax groups, but you can change it if necessary.
Procedure: Create a Sales Tax Group - Attach to Customer or Vendor

Attach a sales tax group to a customer or vendor on the Setup area of the Customers form or Vendors form. This is the default sales tax group for transactions that involve the customer. As with all defaults, you can change the sales tax group on individual transactions, if necessary. Additionally, you can attach a default sales tax group to each ledger account for purchases or sales excluding a customer or vendor are posted, for example, the ledger account for office equipment. The default sales tax group appears automatically on transactions for the customer or vendor; however, you can change the sales tax group on individual transactions before you post transactions. It is also possible to specify a default sales tax group on Customer and Vendor groups which will then be defaulted to customers and vendors for the group.
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Amount Includes Sales Tax- Additional Information
You can indicate if the amounts entered in journals include sales tax or do not include sales tax. You can specify this information in three different forms: General ledger, Parameters form specify the default setting of lowest priority regarding the inclusion of sales tax in journal amounts. This is the setting that will apply to amounts on journals if no other information is supplied through a default setting of higher priority or through a manual setting in a line. General ledger, Journal names form specify a default setting that overrides the default setting on the Parameters form. Lines in journals that are patterned on a specific journal template automatically receive the journal template default setting regarding the inclusion of sales tax in journal amounts, unless you have entered a setting on the journal itself. Individual Journal forms specify a default setting on an individual journal to override the default settings of the Journal names and Parameters forms. The highest priority setting is entered automatically on journal templates, journals, and journal lines as they are created, but you can select or clear the Amount incl. sales tax field at any time. If you select the Amount incl. sales tax field, you must enter gross amounts in journals. Sales taxes are calculated on the basis of the gross amount and posted to the sales tax account. The net amount is posted to the ledger account entered in the journal. If you do not select the Amount incl. sales tax field, you must enter net amounts in journals. The net amount is posted to the ledger account entered in the journal. The sales taxes are calculated on the basis of the net amount and are posted automatically.
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Item Sales Tax Groups

Because items generally determine taxes, you must indicate how taxes are calculated for each item. The Item sales tax group includes all the sales tax codes that apply when you sell that item. The Item sales tax group also may include most of the sales tax codes in the system. When you create the Item sales tax groups, attach the group to Items. NOTE: This information is in Item sales tax group. The association between sales tax codes and the item sales tax group is in the Item sales tax group form, on the Setup tab.
Procedure: Create Item Sales Tax Groups

Perform the following steps to create item sales tax groups: 1. Click General ledger, click Setup, click Sales tax, then click Item sales tax groups. 2. Enter a unique name for the item sales tax group in the Item sales tax group field, and a description in the Description field. This information appears on reports and in other areas throughout Microsoft Dynamics. 3. Select the sales tax code for an item sales tax group on the Setup tab. For a sales tax code to be valid, you must select it for the sales tax group and the item sales tax group. The sales tax codes calculated are determined automatically when you post. 4. Select where the item sales tax line amount will be included on the EU sales list in the Reporting Type field: o Blank the sales tax line amount is included in the Not assigned value column. o Item the sales tax line amount is included in the Items value column. o Service the sales tax line amount is included in the Services value column. o Investment the sales tax line amount is included in the Investment value column. This column is relevant only for Belgium.
Procedure: Set Up a Default Item Sales Tax Group for an Item

To ensure sales tax calculates on all transactions for a specific item group, set up a default item sales tax group. Perform the following steps to set up the default: 1. Click Inventory and warehouse management, click Inventory and then Item groups. 2. Select an item group and then click the Setup FastTab.
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3. Select a value in the Item sales tax group lookup field in the Purchase tax section. This value is the default item sales tax group for the selected item group when you enter it on a purchase order line. 4. Select a value in the Item sales tax group lookup field in the Sales tax section. This value is the default item sales tax group for the selected item group when you enter it on a sales purchase line.
Set Up a Default Item Sales Tax Group for a Ledger Account

To ensure sales tax calculates on all journal transactions that you post to ledger accounts: Set up a default item sales tax group for all ledger accounts Set up default item sales tax groups for particular ledger accounts, if necessary
You can change any default item sales tax group that appears automatically on a journal line as necessary before the transaction posts. NOTE: In sales journals, purchase journals, and other journals where you enter an item number, the item sales tax group attached to the item automatically is entered on the journal lines.
Procedure: Set Up a Default Item Sales Tax Group for a Ledger Account
Perform the following steps to select a default item sales tax group for all ledger accounts: 1. Click General ledger, click Setup, click General ledger parameters. 2. Click the Sales tax link on the navigation pane and then select the default item sales tax group in the Item sales tax group list on the General FastTab. The item sales tax group in this field is entered automatically on journal lines as you create them, unless a specific item sales tax group is attached to the ledger account that you enter in the line. Follow these steps to set up a default item sales tax group for a particular ledger account: 1. Click General ledger, click Chart of accounts and select the ledger account. 2. Select the default item sales tax group in the Item sales tax group list on the Setup tab.
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Sales Tax Jurisdictions

Use Sales Tax Jurisdiction functionality to create the sales tax jurisdictions for which the company must collect sales tax. The sales tax jurisdiction functionality is designed for companies that operate in the United States, but is not a legal requirement. The form is available if an administrator enables the Sales tax jurisdictions configuration key. A sales tax jurisdiction is a grouping of sales tax codes for a particular settlement period (including the sales tax authority). Each jurisdiction is assigned one or more sales tax codes and has only one tax authority. Additionally, transactions that are posted for the sales tax jurisdiction are posted to the accounts of the Sales tax ledger posting group which is assigned to the tax account group that is selected in this form. Some state tax authorities collect taxes for all the jurisdictions within the state. If a state has many jurisdictions and a complex tax code structure, using jurisdictions makes it easier for a company to pay correct tax amounts to the authority. NOTE: A sales tax jurisdiction is not a geographical area. A geographical area can be covered by several jurisdictions, for example a district, town, country or state.
Procedure: Set Up Sales Tax Jurisdictions

Perform the following steps to set up sales tax jurisdictions: 1. Make sure that the configuration key is turned on for sales tax jurisdictions (see Licensing configuration help) 2. Click General ledger, click Setup, click Sales tax, then click Sales tax jurisdictions. 3. Click New button on the toolbar to create a new sales tax jurisdiction record. 4. In the Sales tax jurisdiction code text box, enter a unique identifier for a sales tax jurisdiction. 5. In the Name text box, enter the name of the jurisdiction. 6. In the Settlement period and the Ledger posting group lookup fields, select values. 7. In the Currency lookup field, select the currency of the sales tax jurisdiction. 8. Click Sales tax codes. In the Sales tax codes form, create sales tax codes for the sales taxes that the sales tax authority collects in the sales tax jurisdiction.
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NOTE: Click General ledger > Reports > Base data > Sales tax codes. In the line for the sales tax code, in the Sales tax jurisdiction code lookup field, select a jurisdiction.
Procedure: Set Up Sales Tax Groups for Jurisdictions

Perform the following steps to set up sales tax groups for jurisdictions: 1. Click General ledger, click Setup, click Sales tax, and click Sales tax groups. 2. In the Sales tax group setup drop-down list, select Sales tax jurisdictions. 3. In the Rounding by drop-down list, select the rounding convention for the sales tax group. 4. On the Jurisdiction setup tab, add the sales tax jurisdictions that apply to the sales tax group, and enter information about tax exempt status and use tax if applicable. The sales tax codes that are attached to a selected sales tax jurisdiction appear automatically on the Setup tab. 5. If necessary, you can change the sales tax codes of the jurisdiction in the Sales tax jurisdictions form. 6. In the Print drop-down list, select the way you want sales taxes printed on the invoice. 7. Close the Sales tax groups form. When a journal line or purchase or sales order line is created, the sales tax codes on the sales tax jurisdictions that are attached to sales tax groups are matched to the sales tax codes on the item sales tax groups, and sales taxes are calculated for the transaction.
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Lab 5.6 - Comprehensive Setup of Sales Tax

During this lab you gain comprehensive practice in setting up sales tax information in Microsoft Dynamics AX. Scenario Ken, the Controller for Contoso, has decided to do business with a new vendor, Blue Yonder Airlines, located in Little Rock, Arkansas where business has not previously been conducted. April, the accounts payable coordinator, receives an invoice for 50,000 USD from Blue Yonder Airlines, and comes to you for help because the necessary setups are to post this invoice are not in Microsoft Dynamics AX. You determine to do the following: Set up Blue Yonder Airlines as a vendor Set up the Arkansas Department of Revenue as a vendor Set up two accounts in the Chart of Accounts: one for the Arkansas state sales tax payable (account 220107) and one for the Little Rock city sales tax payable (account 220245) Set up both ledger posting groups Set up a sales tax authority Set up sales tax settlement periods Set up sales tax codes Set up sales tax code intervals Set up sales tax groups Set up item sales tax groups
The vendor's information is in the following table: Field Name City State ZIP Code/Postal Code Group Currency Terms of Payment Value Blue Yonder Airlines Little Rock AR 72205 10 USD N030
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Comprehensive Setup of Sales Tax - Additional Lab Data

The information for Arkansas is in the following table: Field Name Search Name Group Terms of Payment Method of Payment Value The Arkansas Department of Revenue AR tax 70 M15 USAUSD_CHK
You can set up the sales tax authority by using the U.S. Report layout. Plan to round taxes in a typical manner to the nearest penny. Any gain or loss that occurs when you round will post to account 618160. The tax breakdown for city and state taxes is as follows: City of Little Rock: three percent, the maximum tax limit that can be paid is 1000 USD in sales tax State of Arkansas: two percent
Challenge Yourself!
1. Setup two ledger posting groups, by using ARST for Arkansas and LRAST for Little Rock. 2. Setup a sales tax group by using ARLRA as the group name. 3. Setup a sales tax authority by using ARA as the authority name. 4. Enter a sales tax settlement period (AR) to use for each code. The term of payment is 15 days. The settlement period is an interval of one month. Then set up three new periods starting with the beginning of the current month. 5. Plan to set up two sales tax codes, one for each authority, by using the codes ALL_LRCITY and ALL_ARST. Use the standard ledger posting group for each tax code.
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7. Add the two new sales tax codes to the ALL item tax group. 8. After you complete the sales tax setup, record the invoice in an accounts payable Invoice journal. Make sure when creating the journal that you have deselected the Amount incl. sales tax field found on the Setup tab of the journal. Set your session date to 6/30/2011. 9. Review the tax calculation in the journal.
Need a Little Help?

For a visual representation of the sales tax setup process, refer to the lesson titled Sales Tax Overview- Suggested steps. Note that Sales tax jurisdictions will not be used in this lab. Review the tax calculation by clicking Inquiry and then clicking Sales tax totals. It is not necessary to post the invoice.
Step by Step
Set up Blue Yonder Airlines as a vendor: 1. On the Navigation Pane, click Accounts payable, click Vendors, then click All vendors. 2. Click the New - Vendor button on the action pane. In CEU, the next available vendor number is assigned automatically based on setups in the sample data. 3. In the Name field, enter Blue Yonder Airlines. 4. In the Search name field, enter Blue Yonder. 5. In the Group field, click the arrow to select 10. 6. Click the Address FastTab, and click the Add button to create a new address. 7. In the Name and description field enter Primary. 8. In the Country/region field select USA from the drop down list. 9. In the Zip code field, enter 72205. 10. Verify that the tab entries are correct. These values were populated automatically based on setups in the sample data. Click the OK button and close the window. 11. Click the Payment FastTab. 12. In the Terms of payment field, use the arrow to select N030. 13. In the Method of payment field, use the arrow to select USAUSD_CHK. 14. Close the window.
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Set up the Arkansas Department of Revenue as a vendor: 1. On the Navigation Pane, click Accounts payable, click Vendors, then click All vendors. 2. Click the New - Vendor button on the action pane. In CEU, the next available vendor number is assigned automatically based on setups in the sample data 3. In the Name field, enter The Arkansas Department of Revenue. 4. In the Search name field, enter AR tax. 5. In the Group field, click the arrow to select 70. 6. Click the Payment FastTab. 7. In the Terms of payment field, use the arrow to select M15. 8. In the Method of payment field, use the arrow to select USAUSD_CHK. 9. Close the Vendor form. Set up accounts in the Chart of accounts account for sales tax payable: 1. On the Navigation Pane, click General ledger, click Common, then click Main accounts. 2. Click the New - Main account button on the Action Pane. 3. In the Main account field, enter 220107. 4. In the Name field, enter Arkansas state sales tax payable. 5. In the Main account type field, click the arrow to select Balance sheet. 6. Click the Setup FastTab. 7. In the Posting type field, click the arrow to select Sales tax. 8. Repeat steps 2 through 8, adding an account 220245 for Little Rock city sales tax payable. 9. Close the Main accounts form. Set up ledger posting groups: 1. On the Navigation Pane, click General ledger, click Setup, click Sales tax, then click Ledger posting groups. 2. Click the New button to add a line. 3. In the Ledger posting group field, enter ARST. 4. In the Description field, enter Arkansas State Tax. 5. In the Sales tax payable field, click the arrow to select account 220107. 6. In the Settlement account field, click the arrow to select account 220107. 7. Repeat steps 2 through 6, adding a ledger posting group for Little Rock. 8. Close the Account group form.
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Set up a sales tax authority for Arkansas: 1. On the Navigation Pane, click General ledger, click Setup, click Sales tax, then click Sales tax authorities. 2. Click the New button to add a new line. 3. In the Authority field, enter ARA. 4. In the Name field, enter Arkansas Authorities. 5. In the Vendor account field, click the arrow to select The Arkansas Department of Revenue. 6. In the Report layout field, click the arrow to select U.S. report layout. 7. In the Rounding form field, click the arrow to select Normal. 8. In the Round-off field, enter .01. 9. Close the Authority form. Set up a sales tax settlement periods: 1. On the Navigation Pane, click General ledger, click Setup, click Sales tax, then click Sales tax settlement periods. 2. Click the New button to insert a line. 3. In the Settlement period field, enter AR. 4. In the Description field, enter Arkansas Monthly. 5. In the Authority field, click the arrow to select ARA-Arkansas Authority. 6. In the Terms of payment field, use the arrow to select M15. 7. In the Period interval field, use the arrow to select Months. 8. In the Number of units field, enter 1. 9. Click the Periods FastTab. 10. If a new line is not available, press the Add button to add a line. 11. In the From date field, enter 06/01/2011. 12. In the To date field, enter 06/30/2011. 13. Click the Add button two more times to create two additional months. 14. Close the Sales tax settlement periods form. Set up sales tax codes and sales tax code intervals for Arkansas and Little Rock: 1. On the Navigation Pane, click General ledger, click Setup, click Sales tax, then click Sales tax codes. 2. Click the New button to add a line. 3. In the Sales tax code field, enter ALL_ARST. 4. In the Name field, enter Arkansas State - All. 5. In the Settlement period field, click the arrow to select AR. 6. In the Ledger posting group field, click the arrow to select ARST. 7. Click the Values button on the menu bar.
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8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. In the Minimum limit field, enter 0.00. In the Upper limit field, enter 0.00. In the Value field, enter 2.00 for the percentage. Close the Values form. Repeat steps 2 through 6 for Little Rock and enter ALL_LRCITY. Click the Values button. In the Minimum limit field, enter 0.00. In the Upper limit field, enter 0.00. In the Value field, enter 3.00 for the percentage. Close the Values form. Click the Limits button. In the Minimum sales tax field, enter 0.00 In the Maximum sales tax field, enter 1000.00 Close the Limits form. Close the Sales tax codes form.
Set up a sales tax group: 1. On the Navigation Pane, click General ledger, click Setup, click Sales tax, then click Sales tax groups. 2. Click the New button to add a line. 3. In the Sales tax group field, enter ARLRA. 4. In the Description field, enter Arkansas and Little Rock. 5. In the Sales tax group setup field, select Sales tax codes. 6. In the Rounding by field, select Sales tax codes. 7. Click the Setup FastTab and click the Add button. 8. In the Sales tax code field, select ALL_ARST. 9. Click the Add button to add a line. 10. In the Sales tax code field, select ALL_LRCITY. 11. Close the Sales tax group form. 12. On the Navigation Pane, click General ledger, click Setup, click Sales tax, and then click Item sales tax groups. 13. In the left hand Navigation pane, click the ALL line. 14. Click the Setup FastTab. 15. Click the Add button to add a line. 16. In the Sales tax code field, use the arrow to select ALL_ARST. 17. Click the Add button to add a line. 18. In the Sales tax code field, use the arrow to select ALL_LRCITY. 19. Close the form.
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Record the invoice in an accounts payable invoice journal: 1. Click Accounts payable from the Navigation pane, click Journals, click Invoices, and click Invoice journal. 2. Click the New button to add a line. 3. Select the APInv in the Name field. 4. Click the Setup tab, and make sure that the Amount include sales tax check box is not selected. 5. Click the Lines button. 6. Enter 06/30/2011 in the Date field. Accept the Voucher number and Vendor Account type. 7. Select Blue Yonder Airlines in the Account field. 8. In the Invoice field, enter COMPLAB. 9. Enter 50,000 in the Credit field. 10. Enter 618900 in the Offset account field. 11. In the Sales tax group field, select ARLRA. 12. In the Item sales tax group field, select ALL. 13. Click the Inquiries button, then click Sales tax totals. Verify the correct calculation of sales tax: a. For Arkansas, two percent of 50,000 is 1,000. b. For Little Rock, three percent of 50,000 is 1,500; however, the maximum tax should be 1,000. c. Total tax should be 2,000. 14. Close all forms.
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Lab 5.7 - Including Sales Tax in Journal Amounts

During this lab you will set up sales tax in journal amounts. Scenario Ken is the Controller for Contoso. He wants to include sales taxes in journal amounts to make it easier to create journal entries. Ken requests your assistance. For example, suppose the sales tax is ten percent and the total invoice amount is 110.00 USD. If it is specified that the journal amount includes sales tax, the net amount is 100.00 USD (110.00/1.10), and the sales tax amount is 10.00 USD. NOTE: The labs in this chapter must be completed in order as they are dependent on the previous lab.
Challenge Yourself!
Help Ken find the two forms that can specify whether the journal amounts include sales tax.
Need a Little Help?

Check the General ledger parameters and the Journal names form.
Step by Step
Follow these steps: 1. On the Navigation Pane, click General ledger, click Setup, then click General ledger parameters. 2. Click the Sales tax link on the left hand navigation pane. 3. In the Amount include sales tax field, select the field. 4. Close the form. 5. On the Navigation Pane, click General ledger, then click Setup, then click Journals, and then click Journal names. 6. Select the GenJrn journal from the left hand Navigation pane. 7. In the Amount include sales tax field, select the field. 8. Use the GenJrn journal. 9. Close the form.
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Sales Tax Transactions

Sales tax transactions are important in every business. In Microsoft Dynamics AX, you can do the following: Run a sales tax payment report Revise the sales tax amount on a transaction before posting Post sales tax on prepayments Create transactions with conditional sales tax Post sales tax for imported goods
Procedure: Run a Sales Tax Payment Report

Perform the following steps to run a sales tax payments report to calculate the sales tax that is due for a given period: Click General ledger, click Periodic, click Sales tax payment, then click Sales tax payment. 1. In the Settlement period list, select the settlement period for which the sales tax payment is being calculated. 2. In the From date field, enter a date within the sales tax settlement period to be calculated. 3. In the Transactions date field, enter the posting for transactions which are posted for the Sales tax payment.
Procedure: Run a Sales Tax Payment Report - Sales Tax Payment Version Options
Perform the following steps to select the kind of transactions to include in the Sales Tax Payment Report, when clicking the Sales Tax Payment Version field: 1. Select Original to select sales tax transactions on the first posted settlement calculation for the period interval. 2. Select Corrections to select sales tax transactions that are not included in the first posted settlement calculation for the period interval. The report includes all subsequent payments that are posted for the settlement period. 3. Select Latest corrections to select sales tax transactions that are included in the most recent settlement calculation made for the period. If you select the Update check box and this option, the settlement calculation of the current job becomes the most recent settlement calculation. 4. Select Total list to select all sales tax transactions to settle in the current period.
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NOTE: This field is not available if you select the Include corrections check box on the Sales tax section of the General ledger parameters form.
Procedure: Run a Sales Tax Payment Report- Using the Update Check Box
The settlement calculation only includes the sales tax that you have not yet paid to the sales tax authority. You can make several payments for a single period. Perform the following steps to enter additional information when you run a Sales Tax Payment Report: 1. To post the settlement automatically, specify a number sequence for the sales tax payment voucher on the Number sequences tab in the General ledger parameters form. 2. If you create a vendor account for the sales tax authority on the settlement period, a vendor transaction is created automatically when you select the Update check box and then click OK. If you do not specify a vendor account, you must create a payment to the sales tax authority manually to pay the sales tax you owe for the settlement period. 3. To run the Sales tax payment report without posting it to check the status of the outstanding sales taxes, run the report with the Update option deselected. 4. Click OK to run the report. HINT: To report the sales tax payment correctly to the sales tax authority, select the correct report format in the Report Layout list on the Sales Tax Authority form. HINT: Click General ledger > Reports > Transactions > Sales tax list to print a report about sales tax postings that you have not yet updated.
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Procedure: Revise the Sales Tax Amount on a Transaction Before Posting
In Microsoft Dynamics AX, most of the sales tax posting and calculation occurs automatically. However, occasionally a company may receive several invoices on which the sales tax amount differs from what Microsoft Dynamics AX calculates automatically. To make the sales tax amounts match the invoices, the user may have to change the sales tax amount on a transaction before posting. Perform the following steps to change the calculated sales taxes in a journal line, purchase order line, or sales order line: 1. Select the transaction line that needs the sales tax revision. 2. Click the Sales tax button to open the Temporary sales tax transactions form.
Procedure: Revise the Sales Tax Amount on a Transaction Before Posting - Select Revision Type
Perform the following steps to revise the sales tax amount: 1. Select one of the three types of revisions: o Enter a correction of the sales tax amount in the Actual sales tax amount field for a selected sales tax code line on the Adjustment tab. This amount appears in the Total actual sales tax amount field at the top of the form. o Enter an adjustment amount in the Total actual sales tax amount field if the transaction has several sales tax code lines. This amount distributes among the sales tax code lines that appear in the Temporary sales tax transactions form. o Enter adjustments to the use tax amount in the Actual sales tax charge field if the sales tax code line applies to use taxes on the Adjustment tab. View the original use tax for the sales tax code line in the Sales tax charge field. 2. Click File and then Save to save the record or click the Apply button. 3. Click the Reset actuals button to reset the adjustment. 4. Click the Close button to close the form.
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Procedure: Post Sales Tax on Prepayments
A tax authority can require a company to record sales taxes on prepayments from customers, although a sale has not been made. Follow these steps to set up sales tax on prepayments: 1. Click Accounts receivable, click Setup, then click Accounts receivables parameters. 2. Select the Sales tax on prepayment journal voucher check box in the Ledger and sales tax section. Sales tax calculates and posts whenever you post a prepayment. 3. Select a posting profile in the Posting profile with prepayment journal voucher list that defines the ledger account where the sales tax transactions on prepayments post temporarily.
NOTE: Create a posting profile for the purpose of posting sales tax on prepayments in Accounts receivable > Setup > Posting profiles in the Posting profiles form. Then select the appropriate ledger account on the Setup tab in the Sales tax prepayments list. 4. Select the Prepayment journal voucher check box on the Payment tab when you post a prepayment through a journal. If you omit this step, the sales tax posts incorrectly. When you create a sales invoice and settle the prepayment, an automatic transaction on the sales tax prepayments account offsets the first temporary sales tax transaction.
Transactions with Conditional Sales Tax

Users generally report sales taxes in the period when they create the invoice. When they use conditional sales tax, users must only report the sales tax and base amount to the sales tax authorities when they pay the invoice. If they do not settle the invoice in full with a single payment, the sales taxes automatically are reported proportionally to the actual amount paid on the invoice.
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EXAMPLE: On June 10 Contoso creates an invoice of EUR 10,000 plus EUR 2,500 in sales tax. On July 10 the company reports taxes for June. The EUR 2,500 is not included in the sales tax payment because the invoice is unpaid. On July 15 the customer pays half of its balance due, which is EUR 5,000 plus EUR 1,250 in sales tax. On August 10 the company reports taxes for July. The EUR 1,250 is included in the sales tax payment because the customer paid only part of the invoice. When the rest of the invoice is paid, the rest of the sales tax is reported. In some countries, the sales tax authorities require companies to report tax for the full invoice amount, regardless of whether the full amount is paid.
Procedure: Create Transactions with Conditional Sales Tax

Perform the following steps to set up conditional sales tax on a transaction: 1. Create a separate ledger account(s) for posting sales taxes for invoices awaiting settlement (Optional). This step is optional, because you can choose to post the conditional tax on the same account as the ordinary sales tax. However, many countries legally require separation of these postings. 2. Create a separate ledger posting group for posting the conditional tax to the separate ledger accounts (Optional). If you post the conditional tax to a separate ledger account, you must create a separate ledger posting group to control the postings. 3. Create two settlement periods: one to control conditional tax and one to report sales taxes to the authorities. A separate settlement period for the conditional tax has the following advantages: o It prevents the conditional sales tax from being reported incorrectly o It allows you to generate a report that displays undeclared conditional sales tax amounts
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Perform the following steps to continue to set up conditional sales tax on a transaction: 1. Create two sales tax codes for: o the conditional tax o the sales taxes that you must report 2. When you create the sales tax code for the conditional sales tax, select the General section. 3. Select the sales tax code used for real sales taxes in the Payment sales tax code list. The conditional sales tax then transfers to the selected sales tax code. NOTE: The sales tax rate, which is set up in the Values form, must be the same for both. 4. Set up sales tax groups and item sales tax groups. 5. Select the Conditional tax check box in the General ledger parameters form in the Sales tax section. This parameter ensures the sales tax amount transfers from the ledger account for temporary posting of conditional taxes to the real sales tax account.
Sales Tax for Imported Goods

If you must report the import sales tax, you may need to post a document with the whole amount treated as sales tax. This is necessary when you receive an invoice from the customs for imported goods. Such an invoice only states the tax amount.
Scenario: Sales Tax Import

A European subsidiary of Contoso purchased goods from a vendor that is located in a non-EU country. The vendor did not charge sales tax on the invoice. The customs office sends an invoice to claim tax because the goods crossed the border and the company declared them at customs.
Procedure: Sales Tax Import - Direct Posting

Direct posting of sales tax codes is the only situation in which the sales tax code manually is entered in the invoice journal on the General tab. Perform the following steps to make a direct posting of sales tax import: 1. Create a ledger account for import sales tax. 2. Create a sales tax code for import sales tax. 3. Create a ledger posting group for import sales tax and attach the ledger posting group to the import sales tax code.
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4. Open an invoice journal by clicking Accounts payable, click Journals, click Invoices, click Invoice journals, then click Invoice journal lines. 5. Select the import sales tax code on the General tab in the Sales tax code list. 6. Enter the invoice amount and select the import sales ledger account in the Offset account on the Overview tab. The invoice amount also is listed in the Sales tax amount field. 7. Click Post to post the journal. The sales tax amount is registered in the import sales tax ledger account automatically.
Sales Tax Exemption

Certain countries or regions, for example the European Union, require companies to record justification for sales tax exemption. If no sales tax applies to trade documents, you must report why the sales order is sales tax exempted. To report sales tax exemption, you must associate a sales tax exempt description in trade documents. The sales tax exempt description is saved on sales tax transactions for history and reprinting. When you post sales orders in Microsoft Dynamics AX: The sales tax group and sales tax rate is recorded automatically on the transaction. The actual invoice groups the sales tax transactions according to sales tax rates when the sales tax is not exempted.
If the invoice has sales tax exemptions, it groups the transactions according to sales tax exempt descriptions.
Procedure: Create a Sales Tax Exempt Code

Perform the following steps to provide justification to sales tax exemption: 1. Click General ledger, click Setup, click Sales tax, then click Sales tax exempt codes. 2. Click the New button to create a new sales tax exempt code and then enter the Exempt code and the Description. Close the Sales tax exempt code form. 3. Open General ledger, click Setup, click Sales tax, then click Sales tax group. On the Setup tab, select the sales tax code that you want to use, select the Exempt check box and select an exempt code in the Exempt code list. The description of the sales tax exemption prints on the same line as the exempt code. Close the form.
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4. Open General ledger, click Setup, click Sales tax, then click Sales tax codes. Select the sales tax code that you checked as exempt on the Sales tax groups form in the Setup tab in step 2 of this process. 5. Click Print code in the Print list in the Sales tax code form on the General FastTab to print the sales tax exemption description in trade documents. The print code and the sales tax rate do not print on the sales tax specification line because several sales tax codes with different sales tax rates may be involved. NOTE: You also can print sales tax exempt rates on interest notes and collection letters. Select the Print sales tax exempt number on interest notes and collection letters check box in Accounts receivable > Setup > Forms > Form setup > Interest notes/collection letter sections. NOTE: You can set up tax exempt numbers for customers and vendors in the Customers or Vendors form on the Setup tab.
FIGURE 5.11 SALES TAX EXEMPT CODES
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Lab 5.8 - EU 115 Sales Tax Directive

This is a lab on the EU 115 Sales Tax Directive. Scenario Ken is the Controller of Contoso, a company that has decided to specify sales tax exemptions on invoices for their European subsidiary. Ken asks you to set this up. Before implementing the EU sales tax directive, test the setup using the California Sales tax groups. NOTE: The labs in this chapter must be completed in order as they are dependent on the previous lab.
Challenge Yourself!
Set up the sales tax system so that, when you use tax codes that are marked exempt in the tax system, the Exempt code prints on invoices. Create a new sales tax code named Exempt. Use the Settlement periods, Ledger posting groups, and Sales tax groups already set up in the data for California. Use the following data: Field Settlement period Ledger posting group Sales tax group Customer Item number Exempt code Description Data value CA CAST CA 9100 10000 Subsidiary Sales to Subsidiary
Need a Little Help?

Use the tax information that already is set up for California sales tax codes.
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Step by Step
Follow these steps: 1. Click General ledger, click Setup, click Sales tax, then click Sales tax exempt codes. 2. Click the New button to create a new sales tax exempt code and then enter Subsidiary in the Exempt code field and Sales to Subsidiary in the Description field. Close the Sales tax exempt code form. 3. On the Navigation Pane, click General ledger, click Setup, click Sales tax, then click Sales tax codes. 4. Click the New button to add a line. 5. In the Sales tax code field, enter Exempt. 6. In the Name field, enter Sales tax exemption. 7. In the Settlement Period field, use the arrow to select CA. 8. In the Ledger posting group field, use the arrow to select CAST. 9. In the Print field, click the arrow to select Print code. This will print the sales tax exemption description. 10. Close the Sales tax code form. 11. On the Navigation Pane, click General ledger, click Setup, click Sales tax, then click Sales tax groups. 12. Select the 'CA' sales tax group in the Sales tax group form. 13. In the Setup section, delete all the sales tax codes by highlighting the rows and then by using the Remove button. 14. Click Yes to confirm deletion. 15. Press the Add button to insert a line on the Setup tab. 16. In the Sales tax code list, use the arrow to select the 'Exempt' sales tax code that you just created. 17. Click to select the Exempt check box. 18. Click the Exempt code field, and select Subsidiary. 19. Close the form. 20. On the Navigation Pane, click General ledger, then click Setup, then click Sales tax, then click Item sales tax groups. 21. Click the ALL line in the left hand navigation pane within the form. 22. Click the Setup tab. 23. Click the Add button to add a line. 24. In the Sales tax code field, click the arrow to select Exempt. 25. Close the form. 26. On the Navigation Pane, click Sales and Marketing, click Common, click Sales orders, then click All sales orders. 27. Click the New - Sales Order button on the tool bar to add a new order. 28. In the Customer account field, use the arrow to select customer 9100.
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29. 30. 31. 32. 33. 34. 35. 36. 37. Click Yes to transfer the customer information, if prompted to do so. Click OK to close the Create sales order form. Click Close to close the Infolog form. Click the Item number field in the lower pane. In the Item number field, enter 10000. In the Quantity field, enter 10. In the Size field enter 01. In the Site field enter 1. Click the Line details FastTab and then click the Setup tab in the lower pane. 38. In the Item sales tax group field, use the arrow to select ALL 39. In the Sales tax group field, use the arrow to select CA. 40. Close the Sales order form.
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Withholding Sales Tax

In some countries, the buyer is legally responsible for paying withholding tax. Withholding tax is due on non-inventory deliveries, frequently services, that a supplier, who is not an employee of the company, delivers. The buyer is legally responsible for withholding a certain percentage of the invoice amount at the time of payment. The net amount (= invoice amount reduced by the withholding tax) is paid to the supplier. The tax withheld posts to a ledger account for withholding tax, and periodically is paid to the authorities. The buying company is legally responsible for submitting a report to the tax authorities and to the supplier. Withholding tax: Is a tax on vendors that does not create sales tax transactions. Is a liability if it is calculated on vendor payments and therefore only balance sheet accounts or liability accounts are valid accounts for posting withholding tax. Is reported in fixed reports.
Procedure: Set Up Withholding Tax in Administration and General Ledger

Perform the following steps to set up withholding tax in Administration and General Ledger: 1. Click System Administration, click Setup, then click Licensing, then click Licensing configuration. 2. Expand the General ledger node and select the Withholding tax check box. 3. Close the form. 4. Click General ledger from the Navigation pane, then click Setup, then click Withholding tax, and then click Withholding tax codes. 5. Enter withholding tax codes with values and limits using the Values and Limits buttons. 6. Close the form. 7. Click General ledger, then click Setup, then click Withholding tax, and then click Withholding tax groups. 8. Enter withholding tax groups and attach the relevant withholding tax codes on the Setup tab using the Add button.
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Procedure: Set Up Withholding Tax in Accounts Payable
Because withholding tax applies only to vendor invoices, you must complete the setup in the Accounts payable section. Setting up withholding tax makes it more efficient to: Start the calculation of withholding tax when you pay a vendor invoice. Keep basis data about the vendor for reporting. Allow for the journal to propose this setup by default when you enter a payment into a journal for a vendor who is set up for withholding tax. However, you also can edit the calculated amounts, select a different withholding tax, or deactivate the withholding tax calculation for this particular payment.
Follow these steps to set up withholding tax in Accounts Payable and General Ledger: 1. Click Accounts payable, click Common, click Vendors, then click All vendors. On the Action Pane in the New section click Vendor. 2. On the Invoice and delivery FastTab, select the Calculate withholding tax check box and a Withholding tax group to activate the calculation when a payment is entered in a journal.
Procedure: Calculate and Post Withholding Tax

Calculate and post withholding tax in the Payment journal form in the Accounts payable section, or in the General journal form in the General ledger section. The default withholding tax group of the vendor displays in the withholding tax group list. Perform the following steps to calculate and post withholding tax: 1. Click Accounts payable, then click Journals, then click Payments, and then click Payment Journals. 2. On the Action Pane in the New section click Payment journal. 3. Click New to add new payment journal and then click the Lines button. 4. Enter a payment date and select the vendor account that is set up to calculate withholding tax. 5. By default, the Withholding tax group field displays the withholding tax group for the vendor. You can select a different group or delete the field value if no withholding tax should be calculated for the line. 6. Click Functions, then Settlement, and select Yes or No to remove existing marked transactions. Use the Mark check box in the succeeding form to modify the open invoices that you want to pay. 7. Verify the Infolog information about the calculated withholding tax and close the Infolog.
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8. Optional: Click the Withholding tax tab for each selected line to change or delete the calculated withholding tax. You can also create lines and enter the information. 9. Close the Open transaction editing form. The payment amount on the journal line is reduced by the withholding tax amount. 10. Validate and post the payment journal by clicking the Validate button on the Action bar. In the Payment journal form, all transactions are considered as payments, and the withholding tax setup is always handled as described in the steps earlier in this section. In the General journal form, withholding tax is calculated automatically when the following conditions are true: A vendor account that is set up to calculate withholding tax is selected for the journal line. There is no entry in the Invoice field for the selected journal line.
Procedure: Withholding Sales Tax Reports and Inquiry

Perform the following steps to create withholding sales tax reports and an inquiry: 1. Click General ledger, click Reports, click Transactions, then click Withholding sales tax transactions to view a report about posted transactions with withheld sales tax. 2. Click General ledger, then click Inquiries, then click Tax, and then click Posted withholding tax to view withholding tax transactions with the possibility to view the ledger transactions for each withholding tax entry.
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Summary
The requirements for tax calculation and tax reporting differ greatly for different countries. Therefore the tax module of a true international ERP system must be comprehensive. In Microsoft Dynamics AX, the tax module offers many different options for tax calculation, posting, and reporting. The features include: Percentage calculation Fixed tax amounts Tax on tax EU tax Tax exemption Packing duty Multiple tax calculation Flexible settlement periods Country-specific tax reporting and additional options
For EU countries, special EU statistic reports such as Intrastate and EU sales list are also available.
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Test Your Knowledge

Test your knowledge with the following questions. 1. Each ledger account can use several tax codes. True or False? ( ) True ( ) False 2. Changes that you make to the ledger account numbers in ledger posting groups only affect ____. ( ) Posted transactions ( ) Deleted transactions ( ) Not yet posted transactions ( ) Posted transactions from previous months 3. Before creating ledger posting groups, you must create a(n) _________ in the General Ledger to link to ledger posting group. ( ) Tax Group ( ) Sales Tax ( ) Account ( ) Group 4. Tax authorities can be ______. (Select all that apply) ( ) Countries ( ) States ( ) Regions ( ) Cities 5. Sales tax can be paid by the Microsoft Dynamics AX system to _____ ? (Select all that apply) ( ) A client ( ) An employee ( ) A vendor ( ) A sales tax authority 6. You use settlement periods to create and manage the periods the company uses to report sales tax. ( ) True ( ) False
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7. Sales tax settlement periods specify at what intervals the company reports taxes. ( ) True ( ) False 8. You use settlement periods to create and manage the periods the company uses to report sales tax. ( ) True ( ) False 9. Sales tax settlement periods specify at what intervals the company reports taxes. ( ) True ( ) False 10. A sales tax code includes information about which of the following? Select all that apply. (Select all that apply) ( ) When the payments are made ( ) How the tax is posted ( ) How the tax is calculated ( ) The currency in which the sales tax is calculated 11. Sales taxes over the minimum limit amount automatically are discontinued and sales taxes under the upper limit amount are set to the upper limit amount. ( ) True ( ) False 12. Specify the origin for the sales tax limits in the Marginal base list. Match the options to the answers. _____ 1. Net amount for each line _____ 2. Net amount for each unit _____ 3. Net amount of invoice balance _____ 4. Gross amount for each line _____ 5. Gross amount for each unit _____ 6. Invoice total incl. other sales tax amounts a. Value of the line, excluding any other taxes b. The total value for the invoice, including any other taxes c. Value of the line, including any other taxes d. Value of the unit, including any other taxes e. The total value for the invoice, excluding any other taxes f. Value of the unit, excluding any other taxes
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13. When the sales tax groups are created, attach the sales tax group to ______. (Select all that apply) ( ) Company ( ) Customers ( ) Ledger accounts ( ) Vendors 14. You cannot change any default item sales tax group that appears automatically on a journal line before you post the transaction. ( ) True ( ) False 15. Is it possible when you create a sales invoice and settle the prepayment, an automatic transaction on the sales tax prepayments account offsets the first temporary sales tax transaction? ( ) Yes ( ) No 16. If the invoice has sales tax exemptions, does it group the transactions according to sales code descriptions? ( ) Yes ( ) No 17. What is a withholding tax? (Select all that apply) ( ) Is calculated on a vendor payment, which is a liability. Therefore, only balance sheet accounts or liability accounts are valid accounts for posting withholding tax. ( ) Is recorded on the transaction. ( ) Is a tax on vendors, which does not create sales tax transactions. ( ) Is reported in fixed reports.
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Quick Interaction: Lessons Learned

Take a moment and write down three key points you have learned from this chapter 1.
2.
3.
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Solutions
Test Your Knowledge
1. Each ledger account can use several tax codes. True or False? () True ( ) False 2. Changes that you make to the ledger account numbers in ledger posting groups only affect ____. ( ) Posted transactions ( ) Deleted transactions () Not yet posted transactions ( ) Posted transactions from previous months 3. Before creating ledger posting groups, you must create a(n) _________ in the General Ledger to link to ledger posting group. ( ) Tax Group ( ) Sales Tax () Account ( ) Group 4. Tax authorities can be ______. (Select all that apply) () Countries () States () Regions () Cities 5. Sales tax can be paid by the Microsoft Dynamics AX system to _____ ? (Select all that apply) ( ) A client ( ) An employee () A vendor () A sales tax authority 6. You use settlement periods to create and manage the periods the company uses to report sales tax. () True ( ) False
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7. Sales tax settlement periods specify at what intervals the company reports taxes. () True ( ) False 8. A sales tax code includes information about which of the following? Select all that apply. (Select all that apply) () When the payments are made () How the tax is posted () How the tax is calculated () The currency in which the sales tax is calculated 9. Sales taxes over the minimum limit amount automatically are discontinued and sales taxes under the upper limit amount are set to the upper limit amount. ( ) True () False 10. Specify the origin for the sales tax limits in the Marginal base list. Match the options to the answers. a 1. Net amount for each line f 2. Net amount for each unit e 3. Net amount of invoice balance c 4. Gross amount for each line d 5. Gross amount for each unit b 6. Invoice total incl. other sales tax amounts a. Value of the line, excluding any other taxes b. The total value for the invoice, including any other taxes c. Value of the line, including any other taxes d. Value of the unit, including any other taxes e. The total value for the invoice, excluding any other taxes f. Value of the unit, excluding any other taxes
11. When the sales tax groups are created, attach the sales tax group to ______. (Select all that apply) ( ) Company () Customers () Ledger accounts () Vendors
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12. You cannot change any default item sales tax group that appears automatically on a journal line before you post the transaction. ( ) True () False 13. Is it possible when you create a sales invoice and settle the prepayment, an automatic transaction on the sales tax prepayments account offsets the first temporary sales tax transaction? () Yes ( ) No 14. If the invoice has sales tax exemptions, does it group the transactions according to sales code descriptions? ( ) Yes () No 15. What is a withholding tax? (Select all that apply) () Is calculated on a vendor payment, which is a liability. Therefore, only balance sheet accounts or liability accounts are valid accounts for posting withholding tax. ( ) Is recorded on the transaction. () Is a tax on vendors, which does not create sales tax transactions. () Is reported in fixed reports.
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Chapter 5: Sales Tax Setup

CHAPTER 5: SALES TAX SETUP

Financials I in Microsoft Dynamics AX 2012

Sales Tax Overview

Chapter 5: Sales Tax Setup

FIGURE 5.1 SALES TAX SETUP IMAGE

Financials I in Microsoft Dynamics AX 2012

FIGURE 5.2 AFFECT OF SALES TAX CODES ON SALES TAX CALCULATION

Ledger Posting Groups

Chapter 5: Sales Tax Setup

Ledger Posting Groups - Types of Accounts

Procedure: Create Ledger Posting Groups

Financials I in Microsoft Dynamics AX 2012

FIGURE 5.3 ACCOUNT GROUP- LEDGER POSTING GROUPS FORM

Create Ledger Posting Groups - Posting Example

Chapter 5: Sales Tax Setup

Financials I in Microsoft Dynamics AX 2012

Create Ledger Posting Groups- Use Tax Payable Example

Chapter 5: Sales Tax Setup

Financials I in Microsoft Dynamics AX 2012

Lab 5.1 - Create a Ledger Posting Group

Need a Little Help?

Chapter 5: Sales Tax Setup

Financials I in Microsoft Dynamics AX 2012

Sales Tax Authorities

Procedure: Create a Sales Tax Authority

Chapter 5: Sales Tax Setup

FIGURE 5.4 AUTHORITY FORM

Procedure: Create a Sales Tax Authority - General

Financials I in Microsoft Dynamics AX 2012

Procedure: Create a Sales Tax Authority- Address and Contact

Chapter 5: Sales Tax Setup

Lab 5.2 - Create a Sales Tax Authority

Need a Little Help?

Financials I in Microsoft Dynamics AX 2012

Chapter 5: Sales Tax Setup

Financials I in Microsoft Dynamics AX 2012

Sales Tax Settlement Periods

Procedure: Create Sales Tax Settlement Period

Chapter 5: Sales Tax Setup

FIGURE 5.5 SALES TAX SETTLEMENT PERIODS FORM

Procedure: Add Terms of Payment

Financials I in Microsoft Dynamics AX 2012

Procedure: Specify the Actual Periods

Example: Create Sales Tax Settlement Periods

Chapter 5: Sales Tax Setup

Inquire about Sales Tax Settlement Periods

Financials I in Microsoft Dynamics AX 2012

Lab 5.4 - Setup of Sales Tax Settlement Periods

Need a Little Help?

Chapter 5: Sales Tax Setup

Financials I in Microsoft Dynamics AX 2012

Sales Tax Codes

Sales Tax Codes - When to Create

Procedure: Create a Sales Tax Code - Overview

Chapter 5: Sales Tax Setup

FIGURE 5.6 SALES TAX CODES FORM

Procedure: Create a Sales Tax Code - General

Financials I in Microsoft Dynamics AX 2012

Procedure: Create a Sales Tax Code - Calculation

Chapter 5: Sales Tax Setup

FIGURE 5.7 SALES TAX CODE CALCULATIONS