Tax Overview

U.S. states have a variety of methods for calculating and charging sales tax, some of them potentially overlapping. For that reason, sales tax rate charts should be studied before defining sales tax calculation methods. For more information on sales tax, please see Defining Sales Tax.

Countries other than the U.S. charge a VAT (Value Added Tax) tax rather than the U.S. sales tax. VAT tax is a European sales and purchase tax that is collected and paid by the organizations with a turnover greater than £30,000 (in the United Kingdom). Personify maintains the VAT tax categories and percentages over time. Since tax liabilities are owned by the financial company, they must be defined by company to associate a company liability account. For more information on VAT tax, please see Defining VAT Tax.

The following steps are required for defining tax:

1. Define tax rules at the organization unit level (one-time setup).
This is done on the General System Parameters screen in Organization Unit Maintenance. For more information, please see Defining General Organization Unit System Setup Parameters.

2. Define tax for the address locations where customers may pay tax.
This is done via the Sales Tax or VAT Tax Maintenance screens, depending on your tax setup in the previous step. For more information, please see Defining Sales Tax or Defining VAT Tax.

3. Define products as taxable and select the tax of tax to be charged.
This is done via the GL Accounts screen in Product Maintenance. Tax is typically defined for subscriptions and inventoried products. For more information, please see Defining Inventoried Product GL Accounts or Defining Subscription Product GL Accounts.

When the amount of an order is calculated, the appropriate tax will be calculated (or recalculated if an existing order is being adjusted or canceled) and stored with the order. The system performs the following checks when calculating tax on orders:

1. Is the product taxable?
Whether or not a product is taxable is defined via the GL Accounts screen in Product Maintenance. Tax is typically defined for subscriptions and inventoried products. For more information, please see Defining Inventoried Product GL Accounts or Defining Subscription Product GL Accounts.

2. Is the bill-to customer taxable?
All customers are taxable unless tax exempt information is defined. For more information, please see Adding Tax Information to a Constituent's Record in CRM360. Please note that the ORD700 batch process recalculates tax exemption for proforma orders.

3. Is the ship-to address taxable?
Sales tax locations are defined on the Sales Tax Maintenance screen. For more information, please see Defining Sales Tax.

Sales tax is calculated based on the ship-to location, but the tax exemption is owned by the bill-to customer. If the bill-to customer is tax exempt in the ship-to location (i.e., state, country, etc.), the order will remain tax exempt.