Taxcode

The Taxcode file contains one record for each of the tax districts or authorities that you might need to collect tax for.  At least one taxcode with a 0 rate is also maintained and used for shipments to zipcodes or other destinations where you do not have a tax requirement.

Each Taxcode record contains a Code field, a Tax Authority field, and a field which stores the total tax rate in effect for shipments into the district.  Each Taxcode record also contains a flag that indicates whether shipping charges are taxable in the district, and a GL autopost number – which tells the system which GL account tax collected for the taxcode should be posted to.  The autopost number can be used to post one or more taxcodes to a specific account so that the sales tax payable account can be maintained on a state level.  

The total tax rate in each Taxcode record is used by the system when calculating the amount of sales tax to be collected for an order or invoice.  The rate in each Taxcode record can be updated as required.  The current taxrate for each Taxcode is applied to each invoice that is generated by the system (this behavior ensures that orders entered using the old rate will pick up the updated rate during invoicing).

Each Taxcode record also contains fields which allow you to record the state, city, county associated with the district and any additional rate information for the district.  Taxcode records are created and maintained in the Taxcode File (File 159).  

In StreamV, Taxcodes are normally assigned automatically by the system.  This is accomplished by loading the zip code table in the system with the correct Taxcode for each zipcode. The zipcode records are also normally loaded with the city, state and zip associated with the zip code.  Once the zip code information is loaded, the correct Taxcode record can be automatically loaded into each customer and shipto record – based on the zipcode used for each record, as the operator creates the records. 

Taxcodes can also be manually assigned by the operator if required.  This may be necessary when you ship to destinations that do not have a U.S. zipcode, when you are collecting VAT taxes, that are not based on the shipping destination, or when it just makes more sense to manually assign the Taxcode to each record.

Utility programs allow you to update existing customer, shipto and sales order records with the Taxcode associated with the zip code for each record.  This allows you to update the zip code and tax code tables and then carry the changes through any other related records when required.

Note:  The Taxtype and Taxcode information are what determines if a specific order or invoice will have tax applied to it.  There is a Nexus control record that is used for Sales Tax Certificate Management, but this record is used only for holding orders without valid resale certificates, and it is NOT used for sales tax calculations or reporting purposes.  The Taxcode and Nexus information in the system should be in synch, but it is your responsibility to make sure the records are set up properly.  The system does not enforce any relationship between the Nexus record and the Taxcodes that you set up for each state.

The number of Taxcode records that are required in your system is based on the locations in which you have Nexus or a requirement to collect tax.  In some cases, it makes sense to create a small number of Taxcode records, in others you may need to maintain taxcodes for multiple states and may need a large number of taxcode records.  The basic rule is that the zip codes where you have a tax liability should be pointed to the correct taxcode, and the zip codes where you don’t have a tax liabilty can be pointed to a Taxcode with a zero taxrate.

Normally a taxcode record is created for each taxable district you do business in, and an additional taxcode record (typically NO TAX), with a rate of 0 is created to handle regions in which you do not have Nexus (a requirement to collect tax). 

Example 1-  you collect tax only in one state (MD), and there is only one tax rate for the entire state, you would only require 2 taxcode records in the system.  One would be NO TAX – for all zipcodes outside the state, and one for the State itself (MD for example at 6%) – this Taxcode would be loaded into all zip codes inside the state of MD.

Taxcode	Authority	Rate	Tax Shipping	Autopost
MD	MARYLAND	6.00	Y	372
NO TAX	NO TAX	0	N	370 (DEFAULT)

Once the zip code table is loaded (MD in the Maryland Zipcodes, and NO TAX in all the other zipcodes), the system would automatically load the MD Taxcode into customer and shipto records with Maryland zipcodes, and NO TAX into customer and shipto records outside of the state.  The Maryland taxcode would apply the 6% taxrate to Maryland Retail orders, and A Maryland Resale order would not be taxed due to the Taxtype.  The No Tax Taxcode would apply a rate of 0 to any orders shipped to locations outside of MD (Resale or retail).

Example 2 -  In a more complex situation, you might collect tax in multiple states that have multiple rates (ie you collect in MD, CA, NY).  In this case, you would create taxcode records for MD (1 record), NY (multiple records – one for each tax district), and CA (multiple records - one record for each tax distict).  You would also create a NO TAX taxcode record with a 0 rate – and this would be assigned to the zipcodes which are outside of the states that you collect tax for.   The below table illustrates some of the taxcodes that would be required to handle this example.  The taxcodes are grouped by state for reporting purposes (the tax report outputs by state, taxtype, then taxcode).  The taxcodes are also set up so that the sales tax liability is maintained at the state level in the General Ledger (using the autopost number).

 

Taxcode	Authority	Rate	Tax Shipping	Autopost
CA1	CA-ALAMEDA	8.75	Y	371
CA10	CA-FRESNO	7.97	Y	371
CA9	CA-EL DORADO	7.25
CA9PCE	CA-EL DORADO- PLACERVILLE	7.50	Y	371
CA9STL	CA-EL DORADO-SOUTH LAKE TAHOE	7.75	Y	371
MD	MARYLAND	6.00	Y	372
NO TAX	NO TAX	0.00	N	370
NY1	NY-ALBANY	8.00	Y	373
NY10	NY-CLINTON	8.00	Y	373
NY16	NY-ESSEX	7.75	Y	373

 

Note that in many cases, the tax district may be a county – (like Alameda, or Santa Barbara, in California), and in some cases, the tax authority may be cities within a county – for example, the County of El Dorado in California, would require at least 3 records, as there is one rate for the County El Dorado, and different rates for South Lake Tahoe and Placerville – which are both located in El Dorado County). 

The Taxcode for each sale is normally based on the address to which the items are being shipped, but in some cases, you may even have multiple taxcodes for a single geographic location (to handle different rates by item item or customer type).  Examples include: In the US there are various surcharge taxes, for example on new boats. In Austria there is a different tax rate on luxury items vs. normal items.  In Switzerland there are different levels of tax on sales made to different types of resellers. 

The normal process for setting up Taxcode records is to

1.  Determine the states in which you have Nexus and the number of tax districts in each state for which you need to collect tax, and report on taxable and nontaxable sales.  This determines how may taxcodes are required in the system.

2.  Setup the Taxcode records in the Taxcode table with the total rate appropriate for each taxing authority.  Set the Tax Shipping flag in each Taxcode based on whether or not the taxing authority requires you to charge tax on the shipping charges to the customer.

3.  The Taxcodes can then be loaded into the zip code table to allow the system to automatically determine the correct tax code (and corresponding tax rate) for each customer or shipping address based on the zip code.

Automated Taxcode Assignment – As indicated above, the system may be configured to automatically load the Taxcode field in Customer and Shipto addresses.  If the system control parameter TAXZIP01 is set to "Y", the system will check the zip code entered by the operator when a new customer or shipping address record is being created.  The system looks up this zip code in the Zipcode table and it returns the Taxcode assigned to the zip code to the new customer or Shipto address. 

Utility programs are also available to allow back loading or automated assignment of Taxcodes to older or converted data.  Please see the Sales Tax Processing Configuration Guide for more information about the system parameters used by this Sales Tax System or for more information about the conversion and utility programs supplied with the system.

Shipping Tax

The Stream applications determine whether tax should be charged on the shipping amounts for each order based on the Tax Shipping Flag in each Taxcode Record.  If the Tax Shipping  flag is set to Y, then the system will apply sales tax to any shipping amount that is charged for the order.  In the current systems, the shipping field contains both shipping and handling amounts, and sales tax is applied to the entire amount.