Setting Up Taxes with Tax Authorities

What are Tax Authorities

Tax authorities are used to set up organizations which collect different types of taxes and then define tax rates for products, stores, and categories of products. They can also be used to record tax exemption information, such as resale ID numbers, for various parties and tax authorities. Tax authorities replaced the older _SalesTaxLookup entities in opentaps version 0.9 for managing sales tax rates for stores and organizations.

Setting Up Tax Authorities

The first step is setting up a tax authority is defining an organization or party which collects taxes, such as the California Board of Equalization or the New York State Department of Taxation and Finance. This can be done in [Party] > [Create] >> [Create New Party Group].

Then, go to [Accounting] > [Tax Authorities] >> [New Tax Authority] to define a geographic region where your new tax authority organization has taxation powers. You can set whether a tax ID is required for a party to be tax-exempt from this authority and, if so, what the regex pattern for the tax ID must be. You can also set whether prices should include the tax (such as with European VAT) or not include the tax (such as US sales tax)

After creating your tax authority, you will see several tab bars for working with it. The important ones seem to be:

• [Tax Authority] – edit information you’ve just created.
• [Association] – you can define associations between tax authorities based on two relationships: collection agent and exemption inheritance. One authority could serve as collection agent for another, in the way that one US state tax authority could collect on the behalf of many counties. Exemption inheritance means that if a party, such as a customer, is exempt from one authority, it is exempt from another one as well.
• [Gl Accounts] – defines the General Ledger account to record tax liabilities for this tax authority for each internal organization
• [Product Rates] – used define tax rates for products. For example, set type to “Sales Tax” and store ID to a product store’s ID code, leave category blank and title transfer blank, and set the tax percentage, and you would have defined the tax rate for the tax authority’s geographic region. You can use the fields “min item price,” “min purchase,” and “tax shipping” to control the minimum price of the item, the minimum amount of the purchase, and whether shipping charges should be taxed.
• [Parties] – can be used to view and set exemption status for new parties and enter their tax IDs. This page is the inverse of the * [Tax Infos] tab in [Party Manager]’s party profile page: it shows all the parties related to a tax authority, while the tax infos tab in party manager shows all the tax authorities of a party.