Objective

Sales tax is a government imposed percentage tax on the selling of certain property or services. Sales tax will make part of the government's revenue. This means the taxing entity is budgeting for this expected income of cash & they expect your business to supply it. Thus the need of the business to track, collect, & report on sales tax.
AGRIS software has the capability of meeting these tracking & reporting needs. It's all in how the software is setup.
We will review some options for sales tax setup that show the simplicity & the complexity we can go to to accomplish the reporting needs you have. At the end of this class you should be armed with the knowledge you need to understand what and/or where the data you are currently collecting is within AGRIS & how to make the changes necessary to improve your functionality.

Where is the Tax

Tax information is connected to:

• Invoice Line Items

• Invoices

• Payments

Invoice / Payment Structure

Note that the information that is driven to the ledger shows sales tax by the whole invoice, not by line items.

Note that the information is driven by the payment record. We do not know what line items were on the original invoice to tell us how to code tax. Only the invoice itself.
This means that when balancing the subsidiary to the ledger sales tax liability accounts, the accurate reports will come from AR Invoice reports & AR Payment reports.

Invoice Line Items

Used to default the appropriate tax rate & amounts that will be saved as the overall tax on the invoice.
The invoice line items will save the tax rate & tax amount that was calculated on each item.
Nothing regarding tax on individual line items will drive to the ledger.
The line item information can have reports run on it.

• Invoiced in AGRIS – The percentage rate & amount of tax each line defaulted will save in the InvTran1.inv file. The Inventory Activity Report will print these fields & allow the user to print totals.

• Invoice outside of AGRIS – other software created invoices that are imported into AGRIS may or may not bring this information into AGRIS. If they do bring the information, it is usually only the sales tax amounts that were used, not the rates.

User-Defined Inventory Activity Report - Sales Tax Report – By Product Category – Rates

Invoice

The invoice document carries the sales taxes that are calculated at time of invoice creation from the line items.
The Ledger is updated from the Accounts Receivable Invoice.
The customer will pay the tax amounts that are part of the overall invoice amount.
The invoice hold for sales tax buckets.
ACR – Setup Information – General Information – Screen 2 of 4

Each of these buckets represents a unique SJI transaction code so that you can drive each field to a different ledger account.
These four sales tax fields are linked to four tax fields on the name/address record & the inventory item record.
Name/Address Accounting Information Screen

These Y/N flags will keep/remove the tax keyed on line items at time of invoicing when you get to the Invoice Summary Screen.
Inventory Item Pricing Information Screen
These codes on the item allow the sales tax field to open up on the invoice during line item entry. If you cannot see these fields on the item at invoicing, then the item itself does not have a table for itself in the Item Maintenance.

You run detailed tax reports form the AR Invoice Reports option.
AR Invoice Report – Monthly Sales Tax Summary
SJI Exec ID – Transaction Analysis Report

Payment

The Payment document carries the sales taxes discounts, if you offer them, that are taken at time of payment of invoice.
If Sales Tax Discounts are turned on, then your invoice terms discount amount will include the discount on items plus sales tax. Warning: Some states require an amended tax return on sales tax discounts. Please check your state's requirements prior to offering sales tax discounts. The extra paperwork may not be worth offering this to your customers.
ACR – Setup Information – General Information – Screen 2 of 4

Invoice Line Item Entry showing Discount & Tax Entry
Invoice Summary Showing Sales Tax Calculation & Discount Affect
Notice that the discount includes the Sales Tax as part of its calculation.
User-Defined AR Payment Report showing Discount Given on Sales Tax
Please note that you do not have the option to sort by state/county code in an AR Payment report although you can print it. Best option would be to take this to a spreadsheet format & sort by state/county for subtotaling purposes.
SJI Exec ID Report – Transaction Analysis Report for Payment Giving Sales Tax Discount

Reports

The reports that show you sales tax calculations or sales tax collected are found through out AGRIS:

Inventory Activity Reports (Standard) –

• Sales Tax Report – by Product

• Sales Tax Report – by Product Description

The standard reports will show the tax amount on each item that was taxed.

Does not have to balance to the invoice record.

WARNING: this means the line item detail from an Inventory Activity Report will not always match the ledger or the AR Invoice Report. It is showing the defaults used but there are situations where these fields don't always update. Imported invoices from other systems often do not have the line item detail to backup the invoice sales tax amount.

Accounts Receivable Invoice Reports (Standard) –

• Monthly Sales Tax Report (Detail)

• Monthly Sales Tax Report (Voided Invoices)

• Monthly Sales Tax Summary

These reports are the ones that actual drive dollars to your Sales Tax Payable account.
WARNING: They will not always match inventory activity reports. Consider the AR Invoice report to be correct.

Accounts Receivable Payment Reports (User-Defined) –

You have the ability to design your own sales tax discount given report in AGRIS. Currently we do not have any standard reports for tracking this function.

System Journal Interface – Execution ID Reports (User-Defined) –

You have the ability to design your own sales tax reports based on the SJI transaction codes.

Taxing Scenarios

• Inventory Line for Tax Amount

• Using the Sales Tax Fields 1-4

• Using the Sales Tax Fields 1-4 with State/County for Tracking Taxing District/Rates

• Tax to report on sales to taxable/non-taxable customers; to prove when sales tax was overridden.

Inventory Line Item for Tax Amounts

This is the most simplistic of the taxing scenarios. You setup an inventory item that represents the sales tax on the invoice. The AGRIS user keys in the sales tax total with the line items.

Setup:

1. Setup Product Category that will drive any inventory in that Product Category to the appropriate Sales Tax Liability in the ledger.Inventory – Setup Information – General Information – Setup Product Category

2. Setup SJI Transaction Codes for the new Product Category SJI – System Code – Accounts Receivable Source Code of new Product Category Transaction Code of SL for Sales Account code – Accounts Payable Sales Tax Source Code

3. Setup inventory item to represent the sales tax.Inventory – Inventory – Item Maintenance – Add New Item This will be a service item.The default prices will be the sales tax percent in decimal form.For example: 5.5% tax become 5.5-cents or $.055.

Process:

1. User starts invoice, keying in all the inventory items.

2. The last line item keyed is for the sales tax.Select the sales tax item number.

3. Key in the taxable amount in the quantity field.

4. Key in the sales tax percentage in decimal format in the price or have it default from the item number.For example: 5.5% tax become 5.5-cents or $.055.

5. Extended amount is the sales tax being charged.

Open

Reporting:

1. Tax Collected:Inventory Activity Report for this Item Number will give totals by invoice number of the tax collected.

Open

1. Taxable Sales: This would be a hand calculation that you back into.Sales Tax collected divided by sales tax rate = Taxable Sales Looking at the example above, the extended amount will be $.58 once the screen is OK'd:$.58 divided by $.055 = $10.55 Taxable Sales

Using Sales Tax Fields 1-4

The invoice has four sales tax buckets that can be driven to unique ledger accounts. This process means you are given a unique purpose to these four fields for collecting a sales tax.

Setup:

1. Define the Sales Tax Fields.ACR – Setup Information – Screen 2 of 4

2. Setup Tax Table Codes.INV – Setup Information – Invoicing Setup – Add/Edit Sales Tax There will be one table per each Sales Tax Description

Open

1. Attach the sales tax code to the inventory item so that it will be taxable.This does not mean that it will get tax 100% of the time. That will depend on what customer purchases it, but if it can ever have tax on it, you want the tax table code attached to the item.

Open

1. Flag the customers that will be taxable. This is usually divided into farmers & non-farmer & non-taxable entities.

Open

1. Setup the SJI Transaction Codes for tracking the buckets.SJI – System Accounts – Accounts Receivable Transaction Codes S1 – S2 – S3 – S4Transaction Codes D1 – D2 – D3 – D4 for Tax Discounts

Open

Process:

1. User starts invoice, keying in all the inventory items.

2. As you key the items, note that the sales tax% fields are visible with a rate in them.You may or may not have access to these fields depending on your System Security.The amounts below will total to $.12 tax.

Open

1. Complete the invoice to the Invoice Summary Screen.The taxes on the line items will be removed based on the name/address general accounting sales tax buckets flags.

Open

1. If any amounts are changed on <Tax/Discount> screen, then the dollars will be allocated back to the items that were marked with tax rates.Taxes will not be allocated back if the inventory item had no table assigned.

Reporting:

1. Tax Collected: Accounts Receivable Invoice Report will show each sales tax bucket amount collected.

Open

1. Taxable Sales: Inventory Activity Report will allow you to run, by product category/inventory item number, each line item that was taxed.

Using Sales Tax Fields 1-4 by Taxing District(State/County Codes)

The invoice has four sales tax buckets that can be driven to unique ledger accounts. These codes can be further broken down by source code (aka state/county.) This process means you are given a unique purpose to these four fields for collecting a sales tax that can be stretched further than just 4-codes.
By adding the State/County code, we add another layer of complexity.

• Ability to default tax rate based on where the product is purchased/delivered.

• Ability to run reports by State/County. So if you are preparing taxing reports for multiple states, then you have the ability to run reports by state.

Setup:

1. Define each of your taxing districts where there is a different rate.

Use a spreadsheet to list each taxing district & rate, nesting the smallest areas into the largest.
In this example we have identified each:

• State

• County

• City

Where product is delivered to or picked up from.
Assign an AGRIS State/County code to each taxing area.
There will be a sales tax table setup for each taxing area (state/county code)

1. Name/Address – Setup Information – Transaction code Options - Add/Edit State/county Codes

Open

1. Turn off the Pickup/Delivery Defaults.Inventory – Setup Information – Invoicing Setup Options – Screen 1 of 3 Default Invoice to Pickup or Delivery? Blank out response.This will make it a required entry at time of invoicing.

Open

1. Define State/County code on location codes.This state/county code will pull onto the invoice when the user keys that this is a Pickup invoice. This means the customer came to your site to pickup the product; there they pay the tax rates for your state/county taxing district.Maintenance – Location Maintenance – Select Location Code Enter State/County (taxing district) code

Open

1. Blank out any state/county codes on the name ID. If the user selects delivered, they will have to search for the appropriate state/county (taxing district) that the product was delivered to.If we leave a default on the name id, then it will pull into the invoice.

1. Require the state/county code on all invoicing transactions.Name/Address – Setup Information – Code Descriptions Require State/County – flag to 1)Sales Validate State/County – flag to 1)Sales

Open

1. Define the Sales Tax Fields.ACR – Setup Information – Screen 2 of 4 In this case, only use Sales Tax field #1. The S1 field in combination with the state/county codes will let us know where the sales tax rates came from.This will leave the other 3-sales tax buckets available for future use.

Open

1. Setup Tax Table Codes.INV – Setup Information – Invoicing Setup – Add/Edit Sales Tax there will be one table per each Sales Tax Description with blank State/County codes this table will be associated to the item to mark it taxable.Table 01 – Sales Tax – 0% rate then key in table 01 but hooked to each state/county code with the accumulated rate for each one.

Open

Open

1. Attach the sales tax code to the inventory item so that it will be taxable.This doesn't mean that it will get tax 100% of the time. That will depend on what customer purchases it, but if it can ever have tax on it, you want the tax table code attached to the item.

Open

1. Flag the customers that will be taxable. This is usually divided into farmers & non-farmer & non-taxable entities.

Open

1. Setup the SJI Transaction Codes for tracking the buckets.SJI – System Accounts – Accounts Receivable Transaction Codes S1 Transaction Codes D1 for Tax Discounts using the state/county code as a source code.

Open

Open

Process:

1. User starts invoice.

2. User receives BEEP because invoice requires the Pickup/Delivery flag be selected.Pickup – pull location code state/county code Delivery – leaves state/county blank, user must select state/county that product was delivered.

Open

1. Key in inventory Items.Note that the tax rates are pulling up on the item in conjunction with the state/county code. You may or may not have access to these fields depending on your System Security.

Open

1. Complete the invoice to the Invoice Summary Screen.The taxes on the line items will be removed based on the name/address general accounting sales tax buckets flags.

Open

1. If any amounts are changed on <Tax/Discount> screen, then the dollars will be allocated back to the items that were marked with tax rates.Taxes will not be allocated back if the inventory item had no table assigned.

Reporting:

1. Tax Collected: Accounts Receivable Invoice Report will show each sales tax bucket amount collected.Report will Sort by State code with the County code detail.You will be able to report to the state revenue department which taxing district the money was collected for.

Open

1. Taxable Sales: Inventory Activity Report will allow you to run, by product category/inventory item number, each line item that was taxed.

Open

Identifying Producer vs Non-producer

Building on the previous examples, we now take the sales tax tracking to its final step – being able to know if a taxable customer had the tax removed or if a non-taxable customer received tax.
The invoice has four sales tax buckets that can be driven to unique ledger accounts. We will use these buckets, combined with the state/county codes, to classify customers & inventory as to what happens in two circumstances.

• Sales Tax #1 Bucket – Taxable Customer

• Sales Tax #2 Bucket – Non-Taxable customer/farmer

There will be four tables (joined with their state/county codes) that will be placed on the inventory items in buckets 1 & 2.

• Table 10 – taxable customer tax

• Table 20 – non-taxable customer tax

• Table 15 – taxable customer – non-taxed inventory

• Table 25 – non-taxable customer – non-taxed inventory

So now we divide all the inventory into how each customer type would be taxed on it.
For Example:
32-0-0 Fertilizer -

• Fred Flintstone (no tax-exempt certificate on file) comes in to buy some 32-0-0 for his garage hydroponics project. He will have to pay sales tax.

• Joe Farmer (tax-exempt certificate on file) comes in to buy 50-tons of 32-0-0 for his 2007 corn crop. This is not taxable.

Item will be flagged
Sales Tax #1 – Taxable Customer – 10 Sales Tax #2 – Non-Taxable Customer – 25
Milk from the C-Store (food not taxed in this state) -

• Fred Flintstone (no tax-exempt certificate on file) comes in to buy some milk. He will not pay sales tax.

• Joe Farmer (tax-exempt certificate on file) comes in to buy milk. This is not taxable..

Item will be flagged
Sales Tax #1 – Taxable Customer – 15 Sales Tax #2 – Non-Taxable Customer – 25
If any taxes are removed, you'll be notified by the rate in that sales tax bucket.
You can use the state/county codes to give further trackability to the sales tax by defining tables 10-15-20-25 with state/county codes.

Setup:

ACR-SETUP INFORMATION-SCREEN 2 OF 4
Sales Tax 2 = Non-Producer Tax = 10 – taxable rate
Sales Tax 2 = Non-Producer Tax = 15 – no-tax
Sales Tax 3 = Producer Tax = 20 – taxable rate
Sales Tax 3 = Producer Tax = 25 – no-tax
INV-SETUP INFORMATION-INVOICING SETUP-ADD/EDIT TAX TABLES
Tables Ends in zero – positive tax rate
Tables Ends in five – zero tax
3-TYPES OF CUSTOMERS FOR TAX FLAGS
Producers – N-N-Y-Y = Name ID C
Non-producers – Y-Y-N-N = Name ID D
Governmental/Churches – N-N-N-N = Name ID E

1. See the previous example steps 1-6 to define your state/county codes & complete the setup.

2. Verify name id type setup on name id records.

3. Define the Sales Tax Fields.

4. Setup Tax Table Codes.

5. Attach the sales tax code to the inventory item so that it will be flagged for Examples:Food – non-taxable to both types of customers Fert/Chem – Taxable to non-farmers Dog Food – Taxable to both customers

Open

1. Flag the customers that will be taxable. This is usually divided into farmers & non-farmer & non-taxable entities.

Open

1. Setup the SJI Transaction Codes for tracking the buckets.See examples before.

Reporting:

1. Tax Collected: Accounts Receivable Invoice Report will show each sales tax bucket amount collected.Add another sort level for name id type for customer type.

Open

1. Proof that all taxable customer paid tax.Run by name id type range & date.Show all sales regardless of tax calculated.Additional Options – Taxable Sales – flag for everything.

Open