Tax Codes Tab of Tax Codes Settings

Use the Tax Codes tab to set up tax codes that are used for calculating taxes throughout DPS.

This tab contains different content based on whether or not you select the Enable Tax Auditing Feature check box on the Tax Auditing tab in Configuration > Accounting > Company Settings. When you enable the Tax Auditing feature, this tab contains the following additional items: Inputs section, Thresholds section, Non-Recoverable Tax section, Tax Code to Include in Basis field, and Tax Currency field (if you use multiple currencies).

Fields

Field	Description
Code	Enter a code by which to identify this tax. The tax code displays in the drop-down list in tax code fields throughout DPS.
Description	Enter a description for this tax code.
Rate	Enter the rate at which to apply this tax. For example, if the rate is 5%, enter 5 in this field (not .05).
Tax Code to Include in Basis	This field displays only if you enabled the Tax Auditing feature. This field applies for compound taxes. For compound taxes, two or more taxes are calculated, and some of the taxes are generated on other taxes. Compound taxes are calculated on a "basis" amount that is the sum of the original amount being taxed plus the tax amount calculated for another applied tax. For example, in Canada, a product could have a federal tax and a provincial tax. The provincial tax is calculated after the federal tax is calculated. The provincial tax is applied to the product price plus the federal tax amount that was calculated for the product price. From the drop-down list, select the tax to include in the basis amount for this tax code. It is the tax that will be taxed. The compound taxes are calculated automatically only when all of the taxes involved in a compound tax are entered for a transaction. To see examples of compound taxes and which tax you enter in the Tax Code to Include in Basis field, see the "Compound Tax Examples" topic. DPS does not support compound taxes when the tax code to include in the basis creates a circular reference. This will lead to unexpected results. Example: Tax Code 1 = 5% and includes tax code 3 in its basis calculation Tax Code 2 = 6% and includes tax code 1 in its basis calculation Tax Code 3 = 4% and includes tax code 2 in its basis calculation All three tax codes are used for a $100 net amount transaction.
Status	From the drop-down list, select one of the following: Active: The tax code will be available for calculating taxes throughout DPS. Inactive: The tax code will not be available for calculating taxes in DPS. This status allows you to prevent users from selecting tax codes that you no longer want them to use. You can change a tax code's status to Inactive only if the tax code is not specified as a default tax code in any of the various locations throughout DPS. If it is entered somewhere as a default tax code, you receive an error message. Check the following locations and remove the tax code from the default tax code field to allow a tax code to be changed to Inactive: Path Field/Grid Configuration > Accounting > Company Settings > Tax Auditing tab Default Tax Codes grid Configuration > Time & Expense > Expense Categories > Expense Report Categories form Default Tax Codes grid Configuration > Purchasing & Inventory > Company Settings > Ship To tab > Ship - To grid Tax Code and Tax-2 Code fields Configuration > Billing > Default Terms > Misc tab Tax Codes Default Tax Codes grid Billing > Billing Terms > Misc tab Tax Codes grid Configuration > Accounting > Intercompany Billing > Subledger Terms tab Tax Codes Configuration > Accounting > Taxes > Tax Codes tab Tax to Include in Basis field Info Center > Vendors > Accounting tab Default Tax Code field DPS does not check in-process or open transaction files when you change a tax code's status. Any open or in-process transaction that has a tax code with a status of active that has been changed to inactive is treated as an active tax code, and it will be posted.

Thresholds Section

This section displays only if you enabled the Tax Auditing feature.

Field	Description
Low Rate and High Rate	Enter the lowest and highest tax rate to limit what users can enter when they override the default tax rates in Transaction Center > Transaction Entry. The taxes entered in Transaction Entry are used to calculate tax amounts for AP vouchers, AP disbursements, employee expenses, cash receipts, cash disbursements, invoices, and journal entries.

Fields

Field	Description
Tax Currency	This field displays only if you use multiple currencies and you enabled the Tax Auditing feature. From the drop-down field, select the currency that applies for this tax code. The tax currencies that are included in the drop-down list include all the currencies that are enabled for the active company. This allows you to run reports, including the Tax Analysis report, in the currency of the tax code. Even if the tax currency is the same as the functional currency, you must enter the currency in order to run tax reports in a single currency.
Tax Region	From the drop-down list, select a tax region for the tax code. The drop-down list includes the tax regions that you set up on the Tax Auditing tab in Configuration > Accounting > Company Settings. Specifying a tax region allows the drop-down list in the Tax Code fields in AP voucher entry, AP disbursement entry, and invoice billing terms to include only the tax codes that are appropriate for the vendor or client's specific address that you enter for the transaction or billing terms. The appropriate tax codes are based on the vendor and client's tax country (entered in the Firms hubs) and a tax code's region, which is associated with a country.

Outputs Section

This section is not enabled if you make entries in the Non-Recoverable Tax section on this tab.

The Outputs section applies if you will use a tax code for an output tax. Select the specific invoice charges for which the tax code applies. The tax code is then included in the drop-down list for tax fields in those entry areas.

When the Tax Auditing feature is not turned on, the tax codes that you set up as output taxes in this section can be applied only to invoices created in Billing.

When the Tax Auditing feature is turned on, the tax codes that you set up as output taxes can be applied to Billing invoices as well as to invoices and cash receipts that you enter in Transaction Entry. For a tax code to be available for invoice entry or cash receipt entry in Transaction Entry, you can set it up as an output only tax (it has at least one of the check boxes selected in the Outputs section), or you can set it up as both an input and output tax (it has at least one of the check boxes selected in the Outputs section and at least one of the check boxes selected in the Inputs section—the Transaction Entry check box, in this case).

If none of the Billing or Intercompany Billing check boxes are selected in the Outputs section, and none are selected in the Tax Applies To section on the Intercompany Billing tab on the Tax Codes form (if you use multiple companies and intercompany billings), you will not be able to select the tax code in the following applications:

• Billing Terms, Interactive Billing, and Batch Billing in Billing
• Default Terms in Billing Configuration
• Cash Receipts in Transaction Entry
• Invoices in Transaction Entry

Field	Description
Labor Billing	Select this check box if the tax applies to billing labor charges.
Consultant Billing	Select this check box if the tax applies to billing consultant charges.
Expense Billing	Select this check box if the tax applies to billing expense charges.
Fee Billing	Select this check box if the tax applies to billing fee charges.
Unit Billing	Select this check box if the tax applies to billing unit charges.
Add-on Billing	Select this check box if the tax applies to billing add-on charges.

Field

Description

Account

This field is enabled only if you select a check box in the Outputs section. Click Search, and from the Account lookup select a general ledger account (typically a credit account) for this tax code. The name of the account displays below the Account field. You must enter an account in this field if any of the check boxes are selected in the Outputs section or in the Tax Applies To group on the Intercompany Billing tab on the Tax Codes form (if you use multiple companies and intercompany billing). This account is used when this tax code is applied to the specific part of a Billing invoices that is associated with the check box that you selected in the Output section. If you enter a revenue account, your project revenue is higher after you post the invoice. If you enter a liability account, DPS excludes the sales tax amount from project billings or revenue figures. When you enter a liability account, the typical general ledger entry following the invoice posting would be a cash disbursement that debits the Sales Tax Payable account (the account that you enter in this field).

Fields

Field	Description
Available for Purchasing	This check box displays to the right of the Outputs section only if you have the Purchasing application installed and you do not have the Tax Auditing feature enabled.
	Select this check box to make the tax code available for the Purchasing application. If you clear the Available for Purchasing check box after you have selected it, and there is a tax code entered in the Tax Code and/or Tax-2 Code fields in the Ship-To grid on the Ship tab in Configuration > Purchasing & Inventory > Company Settings, you will receive an error. You will not be able to clear the Available for Purchasing check box until you remove the tax codes entered on the Ship tab.
	When the Tax Auditing feature is enabled, the Available for Purchasing check box displays in the Inputs section on this tab, rather than displaying to the right of the Outputs section.

Inputs Section

This section displays only if you enabled the Tax Auditing feature.

This section applies if you want a tax code to be used for an input tax. Select the areas in DPS for which the tax code applies. The tax code is then included in the drop-down list for the tax fields in those entry areas.

Input taxes are applied to accounts payable vouchers, accounts payable disbursements, employee expenses, cash disbursements, and journal entries in the Transaction Center and to expense reports in Time & Expense.

For a tax code to be available for cash receipts and invoices in the Transaction Center, you must set it up as both an input and output tax (with the Transaction Entry check box selected in the Inputs section) or set it up as an output only tax code.

Field	Description
Available for Purchasing	This check box displays only if you have the Purchasing application installed. Select this check box to make the tax code available for the Purchasing application. When you select this check box, the Transaction Entry check box is automatically selected. This allows the tax feature to work correctly when you create vouchers from purchase orders in Accounts Payable. The Transaction Entry check box must be selected when the Available for Purchasing check box is selected. If you clear the Available for Purchasing check box after you have selected it, and there is a tax code entered in the Tax Code and/or Tax-2 Code fields in the Ship-To grid on the Ship tab in Configuration > Purchasing & Inventory > Company Settings, you will receive an error. You must remove the tax codes that are entered on the Ship tab before you can clear the Available for Purchasing check box. When the Tax Auditing feature is not enabled, the Available for Purchasing check box displays to the right of the Outputs section instead of in the Inputs section.
Transaction Entry	Select this check box to make this tax code available for AP disbursements, AP vouchers, employee expenses, cash disbursements, cash receipts, invoices, and journal entries in Transaction Center > Transaction Entry. For a tax code to be available for cash receipts and invoices in the Transaction Center, you must set it up as both an input and output tax (with the Transaction Entry check box selected in the Inputs section) or set it up as an output only tax code. If you clear the Transaction Entry check box after you have selected it, and there is a tax code entered in any of the default tax code fields in various places in DPS, you will receive an error. You must remove the default tax codes in these locations before you can clear the Transaction Center check box. The default tax codes are entered in the following locations: Path Field/Grid Info Center > Vendors > Accounting tab Default Tax Code field Configuration > Accounting > Company Settings > Tax Auditing tab Default Tax CodesConfiguration > Accounting > Company Settings > Tax Auditing tab grid Configuration > Time & Expense > Expense Categories > Expense Report Categories form Default Tax Codes grid Configuration > Purchasing & Inventory > Company Settings > Ship To tab > Ship - To grid Tax Code and Tax-2 Code fields Configuration > Billing > Default Terms > Misc tab Tax Codes grid Billing > Billing Terms > Misc tab Tax Codes grid Configuration > Accounting > Intercompany Billing > Subledger Terms tab Tax Codes Configuration > Accounting > Taxes > Tax Codes tab Tax to Include in Basis field Info Center > Vendors > Accounting tab Default Tax Code field
Employee Expenses	Select this check box to make this tax code available for expense reports in Time & Expense. If you clear the Employee Expenses check box after you have selected it, and there are tax codes entered in the Default Tax Code grid on the Expense Report Categories form in Configuration > Time & Expense > Expense Categories, you will receive an error. You must remove the tax codes that are entered on the Expense Report Categories form before you can clear the Employee Expense check box.

Field

Description

Account

This field is enabled only if you select one of the check boxes in the Inputs section. Click Search, and from the Account lookup select a general ledger account (typically a debit account) for this tax code. The name of the account displays below the Account field. You must enter an account in this field if any of the check boxes in the Outputs section are selected. Warning: If the input account is missing for any tax code that requires it, you will not be able to post transactions. This account is used when this tax code is applied for the type of entries that are associated with the check boxes (Available for Purchasing, Transaction Entry, and Employee Expenses) that you selected in this section.

Non-Recoverable Tax Section

This section displays only if you enable the Tax Auditing feature on the Tax Auditing tab in Configuration > Accounting > Company Settings.

This section applies if you need to account for both the recoverable and the non-recoverable portions of a tax (such as for the Canadian HST tax) or if you need to use a reverse charge tax.

Non-Recoverable Taxes

Non-recoverable taxes can be applied for AP vouchers, AP disbursements, cash disbursements, journal entries, and employee expenses in the Transaction Center and for expense reports in Time & Expense. These transactions can have more than one non-recoverable tax code applied.

A non-recoverable tax applies for input only taxes (tax codes that have no check boxes selected in the Outputs section). If you select a check box in the Outputs section or a Tax Applies To check box on the Intercompany Billing tab on the Tax Codes form, the Non-Recoverable Tax section is not enabled. Non-recoverable tax codes also do not apply for cash receipts, and you cannot enter them as a default tax code in a project's billing terms.

Non-recoverable taxes are calculated for a transaction and applied to the general ledger accounts when you post a transaction. The tax amounts are not displayed on the entry form in DPS. You have the option to display both recoverable and non-recoverable tax amounts on the Tax Analysis report.

For more information, see the "Non-Recoverable Tax Examples" topic.

Reverse Charge Taxes

Reverse charge taxes apply for only AP voucher, AP disbursement, and employee expense transactions. These taxes are commonly used in the European Union Value Added Tax system.

Field	Description
Rate	If this tax code has a non-recoverable tax portion, enter the non-recoverable rate for this tax. For example, if the rate is 8%, enter 8 (not .08). The percentage that you enter is applied to the net amount of a transaction expense when the tax code is applied. Example: A tax code has a rate of 13% and a non-recoverable rate of 8%. The tax calculation would be 13% of the net amount of the transaction expense. The non-recoverable tax calculation would be 8% of the net amount of the same transaction expense. For more detailed examples, see the "Non-Recoverable Tax Examples" topic. If this tax code is for a reverse charge tax and you selected the Reverse Charge Tax check box, the Rate field is not enabled. It prefills with the rate that you entered in the Rate field at the top of the Tax Codes tab.
Reverse Charge Tax	This check box is enabled when you select the Transaction Entry check box, the Employee Expenses check box, or both of these check boxes in the Inputs section of this tab and you select no check boxes in the Outputs section. Select this check box if the tax code is a reverse charge tax, such as for the European Union Value Added Tax system. With a reverse charge tax, the buyer of a good or service is responsible for recording a VAT transaction. When you select this check box: The tax rate for the reverse charge tax is the tax rate that you enter in the Rate field at the top of the Tax Codes tab. It prefills in the Rate field in the Non-Recoverable Tax section. If you selected the Transaction Entry check box in the Inputs section of this tab, the reverse charge tax code is available to apply to line items in AP vouchers and AP disbursements that you enter in Transaction Center > Transaction Entry. When you select a reverse tax code for an AP voucher or AP disbursement line item, the following general ledger information applies when the transactions are posted: The accounts payable liability will not include the reverse charge tax amount. The tax input account that is entered in the Account field in the Inputs section on this tab is credited if the credit account in the Non-Recoverable Tax section is blank. The credit is applied to the same organization that receives the debit for Net Amount. If you enter a credit account in the Non-Recoverable Tax section on this tab, it is used for the reverse charge amount. The credit is applied to the same organization as the credit project that is entered in the Non-Recoverable Tax section. If the credit account is blank (or not filled in), the tax code's input account will receive a credit entry equal to the reverse charge amount. If you enter a debit account in the Non-Recoverable Tax section on this tab, it is used to offset the credit reverse charge amount. The debit is applied to the same organization as the debit project that is entered in the Non-Recoverable Tax section. If the debit account is blank (or not filled in), the expense account entered for the transaction will be debited for the reverse charge amount and shows as an additional expense on the project and organization that received the Net Amount debit. If you selected the Employee Expenses check box in the Inputs section on this tab, the reverse charge tax code is available to apply to employee expense line items that you enter in Time & Expense > Expense Report and Transaction Center > Transaction Entry. When you select a reverse charge tax code for an expense item in the items grid in either application, you see the following in the line item grid: The reverse charge tax amount is included in the Total Tax Amount column. The amounts in the Net Amount and Payment Amount columns are not decreased by the reverse charge tax amount. When you select a reverse tax code for an employee expense line item, the following general ledger information applies when the transactions are posted: The expense report liability will not include the reverse charge tax amount. The tax input account that is entered in the Account field in the Inputs section on this tab is credited if the credit account in the Non-Recoverable Tax section is blank. The credit is applied to the same organization that receives the debit for Net Amount. If you enter a credit account in the Non-Recoverable Tax section on this tab, it is used for the reverse charge amount. The credit will be applied to the same organization as the credit project that is entered in the Non-Recoverable Tax section. If the credit account is blank (or not filled in), the tax code's input account will receive a credit entry equal to the reverse charge amount. If you enter a debit account in the Non-Recoverable Tax section on this tab, it is used to offset the credit reverse charge amount. The debit will be applied to the same organization as the debit project that is entered in the Non-Recoverable Tax section. If the debit account is blank (or not filled in), the expense account entered for the transaction is debited for the reverse charge amount and shows as an additional expense on the project and organization that received the Net Amount debit. Do not set up a reverse charge tax as a default tax. If you do, the tax code will also be applied for cash disbursement transactions.
Debit	Enter the debit information in these fields for either the non-recoverable portion of the tax or for the reverse charge tax if this is a reverse charge tax. If this is a reverse charge tax and you do not enter a debit account in this field, the account that is entered in the transaction will be used for the reverse charge tax. Account Click in this field to open the Account lookup, and select the account number for the debit. Project Click in this field to open the Project lookup, and select the project number for the debit. Phase Click in this field to open the Phase lookup, and enter the phase for the debit. Task Click in this field to open the Task lookup, and enter the task for the debit.
Credit	Enter the credit information in these fields for either the non-recoverable portion of the tax or for the reverse charge tax if this is a reverse charge tax. Account Click in this field to open the Account lookup, and select the account number for the credit. If this is a reverse charge tax and you do not enter a credit account in this field, the account that is entered in the Account field in the Inputs section on this tab will be used for the reverse charge tax. Project Click in this field to open the Project lookup, and enter the project number for the credit. Phase Click in this field to open the Phase lookup, and enter the phase for the credit. Task Click in this field to open the Task lookup, and enter the task for the credit.