Advanced Tax overview

You can set up Advanced Tax for Accounts Receivable, Order Entry, Purchasing, or any combination of these applications, depending on what you're subscribed to and your business needs. When Advanced Tax is set up, Intacct automatically calculates the sales tax on applicable transactions.

This topic provides an overview of the Advanced Tax setup.

About sales tax

While there is no federal sales tax, most states in the United States, plus the District of Columbia, impose a sales tax on retail sales and some services, as well as a use tax on sales and services. There are approximately 8,000 state, county, and city jurisdictions in the U.S. that charge a sales tax. Some states, such as Florida, Texas, and California, tax services in addition to tangible items.

Businesses are required to collect sales tax in the following cases:

• The customer is in the same state
• The business has nexus in the customer's state

Tax rates vary between states and also on what goods and services are taxable. For example, food is not taxed in some states. Clothing might have a lower tax than other items in the same state. In addition, most states allow counties, cities, and other local areas to levy a sales tax, too. So, businesses must keep records of sales in each city, county, and state in which they do business.

You can use Advanced Tax to automatically calculate the sales tax.

Set up Advanced Tax

Depending on which applications your company is subscribed to, you can configure Advanced Tax for Accounts Receivable, Order Entry, and Purchasing, with the result that Intacct automatically calculates tax on applicable transactions.

Accounts Receivable

The following is an overview of the setup and interaction required in AR for calculating tax:

• Customers: Transactions for new customers are automatically flagged as taxable.
• Account labels: Create labels to add subtotal tax lines in invoices.
• Contact tax groups: Create groups of contacts to assign the way that Accounts Receivable transactions involving those customers, vendors, and their contacts are taxed. For example, you might have tax groups that represent different state, provincial, or local taxes. Suppose the Los Angeles sales tax is 8% but the San Francisco tax is only 7%. Create two tax groups, one for Los Angeles and another for San Francisco. You can then apply one tax schedule to all members in the San Francisco group, and another to the members of the Los Angeles group
• AR account label tax groups: Create groups to organize multiple account labels under one tax category.
• Tax details: Describe the details of a specific type of tax to be applied to a line item. When Intacct calculates taxes, the tax schedule map applies the chosen tax details to any taxable line items. For example, you might specify two tax details (Los Gatos Local and California State) to define local and state tax.
• Tax schedules: Create and use tax schedules to help you determine which tax schedule to apply to each line item. For example, you could create a schedule named Los Gatos - State & Local where two tax details (Los Gatos Local and California State) are assigned. When this schedule is referenced, both taxes are applied.
• Tax schedule maps: Create and use tax schedule maps to determine which tax schedules to apply to which combination of contact tax groups and account label groups. If an account label is in the account label group for the tax schedule map and the vendor contact is in the contact tax group for the map, Intacct automatically applies the tax schedule. In other words, if the item is taxable and the contact is in a certain city, Intacct automatically applies a particular tax schedule.

Order Entry

The following is an overview of the setup and interaction required in OE for calculating tax:

• Customers: Intacct automatically flags transactions for new customers and items as taxable.
• Items: Flag items for sale if they are taxable.
• Contact tax groups: Create groups of contacts to assign the way that customers in Order Entry transactions are taxed. For example, you might have tax groups that represent different state, provincial, or local taxes. Suppose the Los Angeles sales tax is 8% but the San Francisco tax is only 7%. Create two tax groups, one for Los Angeles and another for San Francisco. You can then apply one tax schedule to all customers in the San Francisco group, and another to the customers in the Los Angeles group
• Item tax groups: Create groups of items to assign the way that transactions involving those items are taxed. For example, if your company distributes a product that's considered a luxury item in one locale where luxury items have a separate tax of 3%, you could create an item tax group called 3% Lux Tax in the Item Tax group page so you can assign the appropriate items to that tax group. When the tax is applied, Intacct then knows to call the appropriate tax schedule.
• Tax details: Describe the details of a specific type of tax to be applied to a line item. When taxes are calculated, the tax schedule map applies the chosen tax details to any taxable line items. For example, you might specify two tax details (Los Gatos Local and California State) to define local and state tax.
• Tax schedules: Create and use tax schedules to help you determine which tax schedule to apply to each line item. For example, you could create a schedule named Los Gatos - State & Local where two tax details (Los Gatos Local and California State) are assigned. When this schedule is referenced, both taxes are applied.
• Tax schedule maps: Create and use tax schedule maps to determine which tax schedules to apply to which combination of contact tax groups and item tax groups. In other words, if an item is in the item tax group for the tax schedule map and the vendor contact is in the contact tax group for the map, Intacct automatically applies the tax schedule. You have the flexibility to go further and tie a map to particular transaction definitions, which enables you to apply only at the sales invoice level.

Purchasing

The following is an overview of the setup and interaction required in Purchasing for calculating tax:

• Vendors: Transactions for new vendors and items are automatically flagged as taxable.
• Items: Flag items that are taxable.
• Contact tax groups: Create groups of contacts to assign the way that Purchasing transactions involving those vendors, and their contacts are taxed.
• Item tax groups: Create groups of items to assign the way that transactions involving those items are taxed.
• Tax details: Describe the details of a specific type of tax to be applied to a line item. When taxes are calculated, the tax schedule map applies the chosen tax details to any taxable line items.
• Tax schedules: Create and use tax schedules to help you determine which tax schedule to apply to each line item.
• Tax schedule maps: Create and use tax schedule maps to determine which tax schedule to apply to which combination of contact tax groups and item tax groups. In other words, if the item is in the item tax group for the tax schedule map and the vendor contact is in the contact tax group for the map, Intacct automatically applies the tax schedule.