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Dynamics 365 Community / Forums / Microsoft Dynamics AX (Archived) / Sales Tax Prepayment
Microsoft Dynamics AX (Archived)

Sales Tax Prepayment

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Posted on by oldman.logan 565

We are getting an error when we mark pre-payment for settlement for a vendor along with the invoiced PO. 

"Account for sales tax prepayment for vendor account V00501 in posting profile Group does not exist."

Open-Trans.jpg

We have not faced this issue before. Kindly explain the issue for my better understanding. 

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  • Suggested answer
    Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at

    Hi,

    If you open AP then Setup and there vendor posting profiles then you should be able to identify the posting profile that is used when recording invoices, prepayments, etc. Some companies use a single posting profile only, others use multiple (for example for invoice recordings, prepayments, etc.). You have to find the one that is used for making prepayment. In this posting profile there is a selection box available where you can select the account that is used for posting the sales tax prepayments. Make sure that this field is filled with an account and then try to post you vendor payments again.

    Best regards,

    Ludwig

  • oldman.logan Profile Picture
    oldman.logan 565 on at

    Thank you for your reply Dr. Ludwig. I'm sorry for my ignorance. Could you explain what type of postings will be made to this account? Is there any workaround for this?

  • Suggested answer
    guk1964 Profile Picture
    guk1964 10,888 on at

    Maybe its a new vendor? Or maybe the first time you have used prepayment for this vendor?

    First thing is to check whether the account is  set up.

    Note you have to add the (sales tax group) and (Item sales tax code) on the PO's line first before you add your prepayment amountdocs.microsoft.com/.../set-up-sales-tax-on-prepayments

    This is a clear walk through vsdynamicsfinance.wordpress.com/.../vendor-prepayment

    also see : community.dynamics.com/.../purchase-order-prepayments

  • Suggested answer
    Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at

    Hi,

    The sales tax for prepayment account will hold the tax amount related to your prepayment. Let's say you make a prepayment of $1500 and the tax is 50%. Then $1000 will be recorded on the summary account that is related to your posting profile as a prepayment and the remaining $500 will be posted as sales tax that is related to this prepayment. In other words, the total prepayment amount will be split up in a net and a tax amount. Doing this has an advantage especially if you operate in a VAT environment that you can find in many EU countries. That is because you can get a refund from the government for the $500 VAT prepaid, which is good for your cash flow especially when you make such kind of prepayment for long term contracts or long running projects.

    Does this answer your question?

    Best regards,

    Ludwig

  • oldman.logan Profile Picture
    oldman.logan 565 on at

    The sales tax for prepayment account will hold the tax amount related to your prepayment. Let's say you make a prepayment of $1500 and the tax is 50%. Then $1000 will be recorded on the summary account that is related to your posting profile as a prepayment and the remaining $500 will be posted as sales tax that is related to this prepayment. In other words, the total prepayment amount will be split up in a net and a tax amount. Doing this has an advantage especially if you operate in a VAT environment that you can find in many EU countries. That is because you can get a refund from the government for the $500 VAT prepaid, which is good for your cash flow especially when you make such kind of prepayment for long term contracts or long running projects.

    Does this answer your question?

    Hi Dr. Ludwig. 

    Thanks for your reply. 

    May I ask if this is the same as Input VAT but just on prepayment? 

    If this is the case, I have a doubt. We have vendors outside the country where VAT does not apply. When we import, we are paying input VAT at the port and this is inclusive of VAT for port related charges. So it is not the same amount as the input VAT calculated by AX. So we go for 0% VAT posting for the PO and manually post VAT via journal entry to input VAT account. In this scenario, I think the prepayment tax will cause a mismatch with the VAT we are paying at the port. 

    What should we do in such a situation? 

  • oldman.logan Profile Picture
    oldman.logan 565 on at

    Thank you for your reply magic1949. It's not a new vendor. We have not used prepayments before and encountering this issue for the first time. I discovered it is the issue for the account setup since we have not used this before. But as I mentioned in my earlier reply to Mr. Ludwig, the prepayment tax option is likely to cause conflict with our imports from foreign countries since VAT calculated in the port is different from VAT calculated in AX.

  • Suggested answer
    Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at

    Hi,

    We actually have a similar tax scenario in my home country where we post the AX transaction with a 0% VAT and later on receive an invoice from the importing agency, such as DHL, Fedex, etc. The invoice that we receive let's say from DHL includes the import tax that we post on a separate tax code that has a separate ledger account linked. The 'trick' for posting the tax correctly here is to select the VAT code in the journal line that holds the VAT amount directly. That is, you do not select an item sales tax group and a sales tax group but directly post the transaction with the VAT code selected.

    Yet, this kind of tax has nothing to do with the prepayment functionality that you asked further above.

    Best regards,

    Ludwig

  • oldman.logan Profile Picture
    oldman.logan 565 on at

    Thanks for your reply Dr. Ludwig. Yes, we are currently posting the input VAT using the salestaxcode directly. We do not have an issue with that.

    My concerns are as follows:

    1) Can we use the Input VAT ledger account for prepayment tax as well?

    2) If we specify a separate ledger account for prepayment sales tax for vendors and we are posting input VAT based on DHL invoice (as in your case), how can we settle the two? Obviously, the VAT based on DHL invoice would be higher than our prepayment to the vendor.

  • Suggested answer
    Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at

    Hi,

    Can you explain why you post a sales tax prepayment in this case?

    I have not seen companies posting a prepayment and then later the actual VAT amount directly on the VAT code because this results in the reconciliation issues you mentioned.

    The prepayment would be a BS transaction anyway that does not influence your profit.

    The 'only' thing affected would be your cash flow forecast that does not differentiate between the net prepayment and the tax prepayment amount.

    Best regards,

    Ludwig

  • oldman.logan Profile Picture
    oldman.logan 565 on at

    Hi. We post prepayments after placing PO, because mostly our vendors / suppliers need advance payments maybe 1 or 2 months before shipment for production / arranging the material. Most of these vendors are overseas. We do not have an issue with it affecting the cash flow forecast.

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