Sales Tax Hierarchy

Modified on Fri, 16 Aug at 9:42 AM

When it comes to sales tax setup everything is about the potential for being taxed.

There are two different types of tax code setups, Standard and Absolute.

Standard tax codes are assigned based on the Ship To Customer’s Zip Code or based on an override Type set manually on the customer record.

The Zip Code table points to the corresponding tax code for the geographic area.

Absolute Tax Codes must be assigned manually to customer accounts. There are many tax boundaries that do not line up with zip codes, thus there is a need to have absolute tax codes where you can select specifically what the State Tax Code is and what the County, City, and Local Tax Codes are based on the specific customer.

If the dealership is going to use standard tax codes stick with that or if they are going to use absolute tax codes stick with that, try to avoid mixing the two to avoid confusion.

Most areas are taxed based on the zip code assigned to the Ship to account. However, some states (or certain types of transactions) are Tax At Dealer. If this is the case the tax will be based on whatever the tax code is for the dealership, where the “dealer” is considered the branch. (Branch setup window will show the rate, Department setup will show the flag to indicate whether or not each department is tax at dealer -- example if the typical tax scenario is per zip code but the exception is parts that are sold over the counter, then the parts counter sales department is then flagged to be tax at dealer, while the other departments are not)

Zip Codes Setup - In the Zip Codes window, the Tax Code field will show what tax code is assigned to that specific zip code. The list on the right shows others zip codes within the same county.

Tax Codes Setup

Standard tab -

If using standard tax codes, based on zip code assignments on the ship to customer account, the tax code will need to be set up here.

In the Tax Code field there should be a unique identifier for each tax structure.

Over-Ride Type - if a tax code is marked as an over-ride type it will override the tax code assigned to the zip code. This will also allow you to assign the correct standard tax code to the customer record.

Non-Taxable fields - on the bottom left of this window there are some checkboxes for Non-Taxable items. If the geographical location requires that some items be non-taxable you can check the box for that type of entry. For instance, if everything is taxable except labor simply mark the checkbox for Labor Non-Taxable.

Total Rate - This is the total tax rate, if the tax rate is a total of 8.25% then you would simply enter 8.25 here

Account # field - If the transaction is not for a Rental, then this is the Account # used for the Sales Tax Liability

Rental Account # - If the transaction is for a Rental, then this is the account # used for the Sales Tax Liability

County Portion Rate - if the county portion needs to be shown enter the rate for the county portion here

Account # field - If the County Portion Rate is not zero, then that is the rate of Sales Tax calculated for the County. For example if the Total Rate is 8.25% and the County Portion Rate is 1.25% and the invoice subtotal is $100. Then 7% ($7.00) will go to the Account # listed in the account number that is listed under the Total Rate field and 1.25% ($1.25) will go to this account number listed under the County Portion Rate field.

Maximum Amount - This amount, if not zero, will be the limit that the total sales tax can be for this tax code regardless of county. So if the Total Rate is 8.25% and calculates to $50 and the Maximum Amount is set to $40 then only $40 will be charged for Sales Tax.

Account # Once Paid - This field is no longer used.

Description - This is the description that will display when the tax code is selected

County - If showing the county portion this is the description that will be displayed for the county portion

State, County, City, and Local tabs - If using Absolute Tax Codes each of these tabs will need to be populated to indicate what the appropriate taxing scenario is at each level.

Tax Rate - This is the tax rate for the level selected , if the tax rate is 8.25% then you would simply enter 8.25 here

Rental Rate - This is the tax rate for the level selected that would apply to rental only.

EQ Sale Rate - This is the tax rate for the level selected that would apply to equipment only.

Labor Rate - This is the tax rate for the level selected that would apply to labor only.

Description - This is the description that will display when the tax code is selected

Tax Account # field - This is the Account # used for the Sales Tax Liability

State Code -

County Code -

City Code -

Local Code -

Max Amount - This amount, if not zero, will be the limit that the total sales tax can be for this tax code regardless of county. So if the Total Rate is 8.25% and calculates to $50 and the Maximum Amount is set to $40 then only $40 will be charged for Sales Tax.

Under the County/Prov tab there is an additional option indicated as County Special Flag. This was introduced specifically for the state of TN where there is a requirement on equipment sales specifically to have a progressive tax applied per item. This flag will then use the State Account, State Rate, State Min, and State Max fields for that information. For example, up to $1600 is taxed at one rate, the next $1600 at another rate, and the rest at the specified rate.

Branch Setup - If the requirement is to Tax at Dealer for any transactions, in the Branch Setup window, Tax Setups tab you will identify the Tax Code that is to be used, Then in the Department setups window check the flag to Tax at Dealer.

Department setup - Tax at Dealer flag - if this flag is on and a work order is opened to this department it will tax at the tax code assigned in the Branch setup window.

Sale Code setup - Each individual sale code can also be marked as taxable or not. The taxable flags are checkboxes below each section. The box labeled Taxable is for both Standard and Absolute tax codes. Set to False will not charge tax on items with the corresponding sale code for those utilizing the standard tax code setup. Set to False for those using absolute sales tax codes will not charge sales tax on the corresponding items with the sale code. Set to True will allow the individual check boxes for state, county, city, and local to be set to true or false and taxed accordingly. These checkboxes on the sale code setup will trump what is in the sales tax setup.

Customer Setup - In the Customer setup window under the Tax Codes tab the customer is by default assumed as taxable therefore it will attempt to use the tax code that is assigned to the zip code unless you specify a different tax code that is identified as an override type. So for instance if the customer is tax exempt you will need to use the tax code that was set up as an override type to tax at a rate of 0%. Likewise if they are to get a different tax code than what is assigned to the zip code you will need to specify that override tax code.

Over Ride Ship To Tax Code - this applies only to Bill To customer accounts (notice if you selected a ship to account this option is greyed out). Selecting this will disregard the tax based on the Ship To customer account and assume the taxing structure assigned to the Bill To account.

If the customer should be taxed using Absolute tax codes you will need to check the flag to Use Absolute Tax Codes and identify the individual tax codes for State, County, City, and Local.

Import Tax Code, Lock, Export, and Import - These are specific to the state of Washington. Clicking the Export button will create a file in the appropriate format for the state of Washington’s Tax Board website to upload all of your customer account information. The state then sends back a file that you can Import to adjust your tax codes and ‘realign’ how they apply to your specific customers. The Lock flag will prevent the import from allowing this change on the customer account.

Department Miscellaneous Charge Setup - In Department Setup on the Additional tab, Misc charges can be setup as Taxable. If the Taxable checkbox is checked and the Misc charge is added to a work order, either automatically or when clicking the “Add Dept Charges” button, the Misc charge will be taxable regardless of Sale Code or Absolute Tax Code setup.

In Department Setup on the Additional tab, Add’l Labor Hours can be defined. When adding this charge to a work order by clicking the “Add Dept Charges” button the taxation will be based on Sale Code Setup and Absolute Tax Code Setup.