Follow these steps to provide justification to sales tax exemption:
FIGURE 6.12 SALES TAX EXEMPT CODES FORM
1. Click General ledger, then click Setup, then click Sales tax, then click Sales tax exempt codes.
2. Press CTRL+N 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, then click Setup, then click Sales tax, and 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.
4. Open General ledger, then click Setup, then click Sales tax, and then click Sales tax code. 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 tab 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 tabs.
NOTE: You can set up tax exempt numbers for customers and vendors in the Customers or Vendors form on the Setup tab.
Test Your Knowledge
If the invoice has sales tax exemptions, it groups the transactions according to sales code descriptions.
( ) True ( ) False
Lab 6.8 - 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.
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 Data value
Settlement period CA Ledger posting
Exempt code Subsidiary
Description Sales to Subsidiary
Need a Little Help?
Use the tax information that already is set up for California sales tax codes.
Step by Step
Follow these steps:
1. Click General ledger, then click Setup, then click Sales tax, then click Sales tax exempt codes.
2. Press CTRL+N 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, then click Setup, then click Sales tax, then click Sales tax codes.
4. Press CTRL+N to add a line.
5. In the Sales tax code field, enter Exempt.
6. In the Description 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. Click the General tab.
10. In the Print field, click the arrow to select Print code. This will print the sales tax exemption description.
11. Close the Sales tax code form.
12. On the Navigation Pane, click General ledger, then click Setup, then click Sales tax, and then click Sales tax groups.
13. Select the ‘CA’ sales tax group in the Sales tax group form.
14. Click the Setup tab.
15. Delete all the sales tax codes by highlighting the rows and then by using the delete icon on the toolbar. Accept the warning message by clicking Yes.
16. Press CTRL+N to insert a line on the Setup tab.
17. In the Sales tax code list, use the arrow to select the ‘Exempt’ sales tax code that you just created.
18. Click to select the Exempt check box.
19. Click the Exempt code field, and select Subsidiary.
20. Close the form.
21. On the Navigation Pane, click General ledger, then click Setup, then click Sales tax, then click Item sales tax groups.
22. Click the line.
23. Click the Setup tab.
24. Press CTRL+N to add a line.
25. In the Sales tax code field, click the arrow to select Exempt.
26. Close the form.
27. On the Navigation Pane, click Accounts receivable, then click Sales order details.
28. Click the Advanced button, if that button is visible.
29. Press CTRL+N to add a new order.
30. In the Customer account field, use the arrow to select customer
37. 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. Click the Posting button in the header.
41. Click the Invoice option.
42. Close the Infolog form if necessary.
43. In the Quantity field on the Parameters form, use the arrow to select All. This may already be selected for you.
44. In the Print invoice field, select the field. This may already be selected for you.
45. Click the OK button in the Posting confirmation form.
46. Click Yes in the warning window. The invoice displays to the screen.
47. Verify that the sales tax exempt description is on the invoice.
48. Close the Invoice report.
49. Close the Sales order form.