This needs to be setup correctly before you can use tax in the system.
Go to Tax > Tax Authority Maintenance. Click the Add button
Figure 1: Adding a Jurisdiction
Add a Tax Authority, Description, and Country. Save the line.
Figure 2: Adding a Jurisdiction
• Tax Authority: Two-digit state code
• Description: State name
• Country: US
• Supplier: Leave blank for now.
• Entities:
Enter State in the first box
Enter ‘County’ in the second box if the state has county levels of tax rates & reporting
Enter ‘City’ in the third box if the state has city levels of tax rates & reporting
Enter ‘Local’ in the fourth box if the state has local levels of tax rates & reporting
Enter ‘Parish’ in the fifth box if the state has parish levels of tax rates & reporting
These Entities can vary greatly by state. Use the appropriate entity descriptions based on the Tax Code laws of the state
Go to: Tax codes. Add a Tax Code
Figure 3: Adding a Tax Code
Fill in the details for the tax code. Then click Save.
Figure 4: Adding a Tax Code
Sales/Use Tax: The code for this tax rate. Typically, this will be the 2-digit state abbreviation, followed by a hyphen and an abbreviated name for the rate.
Tax Authority: The Authority created in step #3, to which this code relates.
Description: The City or County or Jurisdiction name followed by full state name
Country: US
Start and End Zip: Optional field: can leave blank
Entities will pull in from the Tax Authority. Fill in appropriate Descriptions.
Compound: leave blank unless a compound tax rate is needed
Sales/Use Tax at Pay: Whether this Tax Code can be used for use tax transactions, sales tax transactions, or both (blank).
Input Account: Enter the Use Tax GL account
Output Account: Enter the Sales Tax GL account
Suspense Account: Enter the GL Account to which tax transactions are posted temporarily, before being posted to the use tax or sales tax accounts.
Freight: Check if Taxable and/or Overridable
There should always exist in each Tax Authority a Tax Code for Exempt status. This code will be created exactly as shown in steps #3-4.
Go to: Tax Rates. Select the correct jurisdiction, Apply the filter, Add a Tax Rate.
Figure 5: Adding a Tax Rate
Fill In the details for the tax rate. Then click save
Figure 6: Adding a Tax Rate
Sales/Use Tax: Enter Tax Code or select with lookup
Effective Date: Enter the effective date of the tax rate. A new line item should be created for each rate change with the appropriate effective dates. Do not overwrite rates on previous lines.
Rate: Enter the rate components for each entity that is in the jurisdiction. Can be left zero if they do not apply.
Max Rate: Leave blank unless there exists a maximum value.
Extra Rate: Leave blank unless there exists an applicable extra rate above the maximum.
Be sure to create a rate for the Exempt Tax Codes as well, with Rates set to 0.00 in each Entity.