Setting Up Taxes with Tax Authorities

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What are Tax Authorities

Tax authorities are used in opentaps to set up organizations which collect the different types of sales taxes for their regions, and then to define tax rates for products, categories of products, and stores. They can also be used to record tax exemption information, such as resale certificate ID numbers for various resellers (parties who sell to other than end buyers). Tax authorities operate within a geographic region that we must configured in the system.

(Note: Tax authorities replaced the older _SalesTaxLookup entities in opentaps version 0.9 for managing sales tax rates for stores and organizations.)

The tax calculation determines a sales tax rate for a transaction by starting with the local geographic region (geoID) of a buyer's address and moving up to the larger geographic units, adding the tax rate of each tax authority it finds by region, until it has totaled a tax rate for all of them that you have configured. When it finds no configured data for a geoID it will charge no tax for that one.

So, the configuration defines the geographic units, and their association with each other, and the taxing authority of each geo unit plus the tax rate charged by each authority.

Configuring Your Geographic Regions

The governmental jurisdictions of tax authorities are their geographic units like city, county, or state, and these will need to be set up if they aren't already in the system. These Geo definitions can be configured in:

Webtools > entity maintenance> and then use 

a. GeoID to define your city, county, or state starting with the highest level units first.

b. Geo Assoc relates your local Geo to the higher level ones like state.  
Geo associations are defined bottom-up, that is with the local unit as the "GeoID" and the higher 
level geo unit as the "GeoIdTo". 
Geo Associations must be defined with the type set to "REGIONS".

c. TaxAuthorityAssociation relates the tax authorities you have defined in top-down mode so that the 
higher authority (like state) is the "taxAuthGeoId" while the lower level authority (like county) is 
the "toTaxAuthGeoId" 

This produces a tree of associated geographic units linked from bottom to top, and a tree of associated tax authorities linked from top down.

Setting Up Tax Authorities

The first step in setting up a tax authority is defining an organization or party group 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]  Fill in the information required. 
*Click: [Save] to create the tax authority.  Then, the Profile screen opens for your new tax authority. Next, 
*Click: Role(s) to assign the special designation to the tax authority.
*Click the "Add To Role" drip down button.
*Select "Tax Authority" from the drop down box.
*Click: [Add].

Now the system knows that this party group is one of your tax authorities, but we still need to define all of its specific tax related information.

Set Up the Accounting Details for a Tax Authority

Next we will open the Accounting section of opentaps which currently has no tab on the user screens;

*On your web browser URL (address) window enter: 
*Login to Accounting with an authorized ID for this section.
*Click: Tax Authorities > [Create Tax Authority]
*In the Geo box enter the tax authority's GeoID or look it up.
*In the Party box enter your new party group ID for the tax authority.
*Enter yes or no for "Require Tax ID for Exemption" regarding the reseller certificate ID.
*Enter the "Tax ID Format Pattern" if you wish to validate data as it is entered by users.
     Refer to Using REGEX Validation Patterns for information on this entry. 
*Enter yes or no for "Include Tax In Price" according the the authority's
tax rules for the type of sales tax to be implemented.
*Click: Save  to create the tax authority entries in the accounting system.

Now the page opens for entry or editing of all the tax authority details that may be required, including these:

  • [Tax Authority] – edit basic information defining the tax authority (you’ve just created).
  • [Categories] - you can define specific categories of your products that are subject to taxation by this authority. These are the categories you have defined or will define in the catalog of products section of opentaps. Refer to Setting Up Your Products.
  • [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 level of tax authority, it is exempt from another any lower level as well.
  • [Gl Accounts] – selects the General Ledger account(s) to record tax liabilities for this tax authority for each internal organization for which you need separate tax accounts. You will always define one of these for the top level organization of your business, usually with the ID "company" in opentaps. If you need to set up an additional new GL account for recording tax liabilities you can do this from the main navigation (splash) screen as follow:
    • Click: AR/AP Financials > Configure > [Create New Account]
    • Select the "GL Account Class Type Key" of LIABILITY in the drop down box.
    • Select the parent account for this new one in the drop down box "Parent GL Account"
    • Enter the Account Code you want to use, normally in the number series with the parent account.
    • Enter the new accounts "Account Name" and an optional "Description".
    • Click: [Add].
  • [Product Rates] – you can 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. This page 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.

This completes setup for Tax Authorities.

Manual pages >> Setting Up Taxes with Zip Code Mapping

Section pages >> Facilities Setup: Stores, Warehouses, Shipping