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:

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.

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.

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.

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, …

• 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.

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.

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

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.

• 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).

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:

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

9/ Example in a vendor invoice

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