Sales tax setup

This article describes how to setup sales tax in Dynamics AX2012

1/ Introduction

In Dynamics AX, there are several elements to create for the sales tax functionality:

  • Ledger posting group: this element contains all ledger accounts.
  • Sales tax code: this element contains the sale tax rate and the calculation method (rounding).
  • Sales tax group: this element is the link between the sales tax code and customer/vendor.
  • Item sales tax group: this element is the link between the sales tax code and the item.
  • Sales tax settlement period: this element contains the period of payment of the sales tax.
  • Sales tax authority: this element is linked to the settlement period. It can be linked to a vendor to automize the payment.

To setup the sales tax, you must follow the order below:

SalesTaxGL001

2/ Step 1: Ledger posting group

Access: General Ledger > Setup > Sales tax > Ledger posting groups

  • Click new to create a new ledger posting group.
  • In the field “ledger posting group”: enter a unique code.
  • In the field “description”: enter a description.
  • On the General tab, enter the ledger account to use.

SalesTaxGL002

Description of the accounts:

  • Sales tax payable: account use in a customer invoice. It is the sale tax to pay at the authority.
  • Sales tax recevable: account use in a vendor invoice. it is the tax deductible.
  • Use tax expense: account use when the sales tax is due on a payment and not on the customer invoice.
  • Use tax payable: account use when the sales tax is due on a payment and not on the vendor invoice.
  • Settlement account: account use for the payment of the tax.
  • Vendor cash discount: account number of cash discount payable.
  • Customer cash discount: account number of cash discount granted.

3/ Step 2: Sales tax authority

Access: General Ledger > Setup > Sales tax > Sales tax authorities

  • Click new to create a new sales tax authority. You must created one at least.
  • Enter a code in the “Authority” field
  • Enter a name/description in the “Name” field.
  • You can link the authority to a vendor account.

SalesTaxGL003

4/ Step 3: Sales tax settlement period

Access: General Ledger > Setup > Sales tax > Sales tax settlement periods

  • Click new to create a new sales tax settlement period.
  • Enter a code in the “Settlement period” field
  • Enter a description
  • Select a Terms of payment (link to the AP>Setup>Payment>Terms of payment screen)
  • Select the authority created in the preceding step.
  • Choose you period interval and the number of units: Months/1 for a monthly payment, Months/3 for a payment every quarter…
  • Create the first single period (select from date and to date) and click on “New period” button in the top of the screen to create the next periods.

SalesTaxGL004

Remark : add the last step in the task list of the end of year to create all the single periods of the new year.

5/ Step 4: Sales tax codes

Access: General Ledger > Setup > Sales tax > Sales tax codes

  • Click on New to create a new sales tax code
  • Enter the sales tax codes (choose a short one if you want to print it in the statement).
  • Enter the full name in the “Name” field.
  • Select the settlement period (created in step 3).
  • Select the ledger posting group for this code (created in step 1).
  • Select ohter option: currency, print code, calculations parameters, …

SalesTaxGL005

  • Click on “Values” to add a rate.
  • You don’t need to enter dates for the first rate (if there is only one rate).
  • You can enter a rate by amount range, and choose the option “interval” in the calculation method.

SalesTaxGL006

Remarks:

  1. If the rate of a sales tax change, you don’t have to create a new code, but just add a new rate in the value screen with the start date, and add an end date to the old rate.
  2. When you create a sales tax code, don’t put the rate in the name, because the rate can change.

6/ Step 5: Sales tax group

Access: General Ledger > Setup > Sales tax > Sales tax groups

To identify the number of group you need, look for the criteria of the application of the sales tax related to the customer or the vendor. Example: national or international customer, vendor with VAT on invoice or VAT on cash receipt, vendor of goods or fixed assets vendor, …

  • Click New to create a new sales tax group.
  • Enter the code of the sales tax group.
  • Enter a description.
  • In the tab “Setup” add all the sales tax codes than can be suitable for the sales tax group.

SalesTaxGL007

  • The sales tax group will be link to the vendor/customer by the vendor/customer group or directly on the vendor/customer screen.

SalesTaxGL008

7/ Step 6: Item sales tax group

Access: General Ledger > Setup > Sales tax > Item sales tax groups

To identify the number of group you need, look for the criteria of the application of the sales tax related to the items. Example: item with normal rate or with reduced rate, exempted item, …

  • Click New to create a new item sales tax group
  • Enter a code to the item sales tax group.
  • Enter a description.
  • In the tab “Setup” add all the sales tax codes than can be suitable for the item sales tax group.

SalesTaxGL009

  • The item sales tax group can be linked to the item or to a general account (if the account is setup at the company level).

SalesTaxGL010

8/ Example for customer invoices

The ABC company need 4 sales tax codes for the customer invoices:

  • Sales tax with normal rate for national customer (code STNN)
  • Sales tax with normal rate for international customer (code STIN)
  • Sales tax with reduced rate for national customer (code STNR)
  • Sales tax with reduced rate for international customer (code STIR)

We need to create 2 sales tax groups :

  • One group for the national customers (code CN): with the sales tax codes STNN & STNR
  • One group for the international customers (code CI): with the sales tax codes STIN & STIR

We need to create 2 item sales tax groups:

  • One for the normal rate (code IN): with the sales tax codes STNN $ STIN
  • One for the reduced rate (code IR): with the sales tax codes STNR & STIR

Sales tax code deduced from a sale to a national customer:

SalesTaxGL011

Sales tax code deduced from a sale to an international customer:

SalesTaxGL012

9/ Example in a vendor invoice

Access: Accounts payable > Common > Purchase order > All purchase orders > Invoice

SalesTaxGL013

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13 thoughts on “Sales tax setup

  1. Thanks for this piece, it was highly informative. I have a question please, a client needs 2 ensure the sales tax codes show on their purchase orders, when you generate the original copy for printing, the sales tax codes should show on the purchase order.

    I’ve tested it on the demo database (Contoso), its working, but on the client’s system it isnt. Is there something I need to do to make it work?

    Your timely response is highly appreciated

    Reply
    • No, you need to select the option “Print code” and enter a Print code in the sales tax codes form. Let me know if it doesn’t work with this setup, and I will looking if anything else is missing.

      Reply
  2. Thank you Violaine, I inserted an option on the print code for the VAT and I gave it VAT. But when I generated a PO, I didnt see it, I dont know what else to do.

    Reply
    • Sorry, my mistake, the print code is only for the invoice.
      For the PO, the setup is in the “Form setup” form in AP > Setup > Forms > Form setup > General > Sales tax specification.

      Reply
  3. Hello,
    Thanks for the post. I am trying to create an invoice (free text invoice) where the invoice amount will be sales tax inclusive. That means I will record US 100 (which is sales tax inclusive) in the free text line and the sales tax will be say US 10 (@ 10%) and revenue will be US 90. What it is doing is calculating the sales tax forward i.e. revenue @ 100 and sales tax @ 10 and total = 110, which we don’t want, we want the sales tax calculations to work backwards.

    The option from customer (at Invoice and delivery fast tab) where you tick sales tax inclusive has already been checked plus in GL parameters the sales tax inclusive box is checked as well, but still its not working. How to get it done?

    Thank you in advance,

    Samran

    Reply
  4. Hi,

    We have looked into the case. The fact is that there is a field “Price includes GST” in the tax invoice line and in GL parameters and at customer level. I tried to personalize to add-in in the ‘invoice lines’ the field to resolve the issue, but every time I would select it, it would vanish after closing the form. Then at the discussion with our Technical team, it was revealed that this option is only available to certain countries, not particularly Australia. Hence we will lodge a request with Microsoft.

    Regards,

    Reply
  5. Very much appreciated you post!

    I am however stuck for on a subject which I hope you could help me with.

    I’m trying to let AX show the calculated tax in a specification on the Sales Invoice.

    So I setup the Sales Tax Specification to be shown in the registration and company currency in the Form Setup under Accounts Receivable.

    I have a sales order with 2 sales tax codes in it.

    One line with 4 percent (code a) and one line with 5.75 percent ( code b )

    Except If I print the invoice / proforma invoice it only shows one of the codes in the specification table…

    What am I doing wrong?

    Reply

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