Crediting Sales Tax

(0) Share

Report

Posted on by Community Member

Frequently a customer fails to provide us with a sales tax exemption certificate so we include sales tax on the invoice. Then, when the payment is received the invoice is short-paid and accompanying the check is the previously requested sales tax exemption certificate. What is the best way to correct your records for this?

Currently, we issue a Sales Order Processing return for the amount of the original invoice including the tax. We then reinvoice the sale without tax, having changed the customer's tax schedule ID to one reflecting their tax exempt status.

While this procedure works and properly adjusts the sales dollars for the affected tax detail IDs, it is a rather labor and time intensive process. I keep thinking there has to be a more efficient way. Does anyone have some suggestions?

I tried entering a return or credit just for the amount of the tax and manually changing the Total Taxable Sales on either the Receivables Tax Entry window or the Sales Tax Summary Entry window but this doesn't get the sales added then to our exempt tax detail ID since I cannot have a negative Total Taxable Sales amount in this window (a negative negative sale to add the sale the exempt tax detail ID) so I know I have accounted for all of my sales.

*This post is locked for comments

I have the same question (0)

All responses (16)

Answers (0)

Redbeard 12,931 on at

Like (0)

Report

Donald,

Sales tax errors can be very expensive, as in most taxing jurisdictions they are immediate and significant. I believe your approach, while time consuming represents the "best practice" for the types of transaction errors you're describing. Perhaps, a process, which helps prevent these errors, like a Customer Hold during new customer setup, would be a good idea?

Was this reply helpful? Yes No
Community Member on at

Like (0)

Report

You can use Credit Memo to reverse the taxes and this will credit A/R and debit your tax liability account.

Was this reply helpful? Yes No
Suggested answer

L Vail 65,271 on at

Like (0)

Report

Hi Donald,

You can use a Receivables Management credit memo and only put the sales tax on it. You do not have to enter an amount for the 'sale' amount. You would need to expand the sales tax detail and just enter the taxable sale amount for what you want it to calculate the tax on. The tax will be the only thing that is on the credit memo. Apply the credit memo to the original invoice and you're done. The entry will be to Debit Taxes Payable and Credit Accounts Receivable. I've done a couple of screenshots to illustrate what I mean.

Kind regards,

Leslie

Was this reply helpful? Yes No
L Vail 65,271 on at

Like (0)

Report

Hi again,

I think my answer didn't address your problem. I didn't look up the impact on the Sales Tax reports, which is what I think the crux of your question was. I'll look into it more carefully and apologize for my hasty reply.

Kind regards,

Leslie

Was this reply helpful? Yes No
Suggested answer

Community Member on at

Like (0)

Report

Hi Don,

Did you ever come up with a way to fix your problem? I have a similar issue. What I've done is credit the sales tax and apply the credit to the invoice. Since we have a Tax Schedule ID set up for exempt sales, I processed a zero dollar invoice and entered the correct exempt Tax Detail ID with the sales amount and the taxable sales amount. This seems to take care of the tax reports. I believe you should be able to do this with debit and credit memos, as well.

Kim

Was this reply helpful? Yes No
Suggested answer

Community Member on at

Like (0)

Report

Hi Leslie, I'm trying to create a credit memo for the tax amount only and when I enter the amount on the tax line and tab the amount becomes zero. Can you give me the complete process for doing credit memos for taxes.

Was this reply helpful? Yes No
L Vail 65,271 on at

Like (0)

Report

Hi,

Did you open up the Receivables tax entry window like the screenshot above?

Leslie

Was this reply helpful? Yes No
KirkLivermont 5,985 on at

Like (0)

Report

I second Harry on this one. While it is technically possible to credit sales tax without having all documentation on file at the time of sale it may not be legal to do so. (I know this to be true of California but I am not sure about other states.)

Kirk

Was this reply helpful? Yes No
Suggested answer

L Vail 65,271 on at

Like (0)

Report

Don,

When you get to the tax line you have to push the little blue arrow to open up the Receivables Tax Entry window. You need to fill out this window by selecting the tax detail and then putting in the sales amount on the dollar amount upon which you want to calculate the sales tax. In my example above I used $1,000 for total sales which translated into $1,000 of taxable sales. I bet the missing component was entering the total sales number. If you do that, the sales tax will calculate and there will not be a sales amount on the credit memo, just the credit for the tax.

Kind regards,

Leslie

Was this reply helpful? Yes No
L Vail 65,271 on at

Like (0)

Report

Hi Kim,

This is exactly what I was describing for Don.

Leslie

Was this reply helpful? Yes No