Tax Rate Change Guide

Additional Info (in this topic)
Creating New records for OLD Rates
Using the Tax Recode Utiltity
Overriding the Header Tax Group

This document applies to WinSol Versions 2-4 and PointForce Enterprise Versions 5-6 (and higher).

This document is a guide only:

The intention is to assist you with the file maintenance that will be necessary to accommodate tax rate changes for new orders, invoices and credit notes going forward from the effective date of the rate change.

This document points out the implications these changes have when invoicing pre-rate change orders (which need the new tax rates applied) and when issuing Credit Notes for Invoices dated prior to the rate change (which need the old tax rates applied).

It is your responsibility to review and understand the new tax rulings and set up the tax tables within your system, as they pertain to your company.

The Maintain Tax Codes (IN05), Maintain Tax Groups (IN06) and Maintain Product Tax Exceptions (IN07) programs used by the WinSol and PointForce Enterprise (PFE) tax routines are user assigned so it is difficult to dictate exactly what to change in a generic document such as this. It is important for you to understand how the tax routines work. For an overview of the tax set up in PFE, please see the Overview of Tax Set Up in Enterprise topic.

Implementing a tax rate change involves more than just loading in the new rate. While that works perfectly for new invoices and credit notes, care must be taken when issuing a credit note after the effective date of the tax change for an invoice that was processed prior to the tax change date; those credit notes need to calculate tax at the old rate.

There are a couple of ways to approach implementing a tax rate change:

Option 1:

One option is to process those credit notes in an isolated batch. You can temporarily change the tax rate in IN05 back to the old rate, process the credits through to IN44 and then change the rate back to the new rate.

Option 2:

click here

Option 3:

Tax Recode Utility

click here

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Creating New Tax Records for the OLD Rates (Option 2)

In this option as soon as you change the tax rate in your existing tax record, tax will begin calculating at the new rate on invoices and credit notes processed after the rate change. You will create new Tax Codes, Tax Groups and Tax Exceptions pointing to the OLD tax rate that will be used on credit notes for sales made prior to the rate change. You will manually override the Tax Group on these credit notes to get the tax to calculate at the old rate.

What to do on the effective date of the Tax Rate change:

Be sure all invoices and credit notes that require the old rate have been processed and there are no open invoicing cycles: IN42/IN43/IN44.
In program IN05, change the rate for your Tax Code to the new rate.
Begin invoicing.
Reminder: In program IN05, DO NOT include the rate in the Tax Code Description fields. This is because when older invoices are reprinted, the Tax description (which comes from IN05) will not match the Tax value (which is picked up from Invoice History and would have been calculated at the rate effective at that time).

What to Consider AFTER the effective date of the Tax Rate change:

Pay special attention when issuing credit notes to customers after the rate change date for invoices issued prior to the rate change date. First check if the original invoice was dated prior to this date. If it was, then taxes were calculated on the original invoice using the old rates. Taxes on the credit note must match taxes on the original invoice.

Set up a new Tax Code (in IN05) for the old tax rate.
Set up a new Tax Group (in IN06) that will incorporate this new tax code.
If you have exceptions in IN07, then you may need to add new records to control the exceptions for your new Tax Groups.
In Enter Invoices/Direct Bills/Credits (IN41), override the Tax Group in the header of the credit note to the Tax Group that stores the OLD rate to facilitate calculating tax at the old rate on that credit note.

Credits created using IN41 Auto Credit or Use RMA:

If using Auto Credit or Use RMA, the Tax Group assigned to the credit note defaults from Invoice History to the Tax Group on the original invoice (which now points to the NEW Tax Rate). The Tax Group in the header of the credit note will need to be overridden to a Tax Group that points to the OLD Tax Rate.

Overriding the Header Tax Group - for information related to overriding the Header Tax Group, an Overriding the Header Tax Group section is included at the end of this topic.
**TIP** Always check the calculated taxes in Folder 4 before you exit the credit note. If there is any doubt as to whether or not the Tax Group is set properly in the detail line, you can check the Tax Group in the More Details window in Folder 3 and revise if required.

RMA’s for Multiple Products Returned:

When using Return Merchandise Entry (IN67) to create an RMA you are selecting invoice detail lines from which goods are being returned. Be sure to check the invoice date (shown in the invoice display list box) and do not mix products belonging to a pre-rate change invoice with a post-rate change invoice on the same RMA.

When the RMA is turned into a credit note, the appropriate Tax Group will need to be assigned to each credit note. You may wish to add a comment on the RMA if the original invoice was at the old rate as a reminder to override the Tax Group in IN41.

Accounts Payable – Input Tax Credit:

When invoices are entered into AP30 for a domestic vendor, the program applies the current tax rate to the entered invoice amount and calculates the Input Tax Credit amount included in the invoice total; this becomes the default GL distribution value to the Input Tax Credit account. The Tax Code that points to the tax rate is identified in program CC00-Accounts Payable, for Input Tax Credit 1 and Input Tax Credit 2.

It is very likely that you will still be entering pre-rate change invoices into AP30 after the rate change effective date. For those invoices, the Input Tax Credit amount(s) will be calculated at the new rate and, therefore, will not match the actual tax charged on the invoice. In those cases, simply override the system generated GL distribution amount for tax in Folder 2.
Alternatively, you could choose to change the Tax Code(s) in CC00-Accounts Payable temporarily to a code that points to the old tax rate, process those invoices in a separate batch and then change the Tax Code(s) back.

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Using the Tax Recode Utility (Option 3)

In this option you will leave your existing Tax records in place to be used when credit notes are generated from Invoice History for sales made prior to the effective date of the rate change. You will not need to override the Tax Group to get tax on the credit note to calculate at the same rate as on the original invoice.

You will create new tax records for the NEW tax rate and use the Tax Recode Utility (CC55) to recode the Tax Group in the Customer Master, Ship-To Master and Open Order file to the new Tax Group. Tax on new orders and on outstanding orders invoiced after the effective date of the rate change will calculate at the new rate. Note: For PointForce iTopia users at PFE version 6.1 or higher, the Tax Group in the Customer Master (SU13) and Ship-To Address (SU14) files must be changed via Edit with Excel and then CC55 is run to recode the Tax Group in the open order file.

NOTE: In July, 2010, the Tax Recode Utility (CC55) was made available for purchase; some users may not have this program.

What to do PRIOR to the tax rate change:

Review your existing Tax Codes, Tax Groups and Product Tax Exceptions to familiarize yourself with your company’s codes and tax setup.
Confirm that the Province/State field is set correctly for applicable customers in SU13 and SU14. This is important because the Province/State Code is used by the Tax Recode Utility to identify these customers.
For the tax that is changing, leave your current Tax Code (in IN05) and your current Tax Group (in IN06) alone. These will be used for Credit Notes generated from Invoice History on pre-tax change sales.
Set up a new Tax Code (in IN05) for the new tax rate.
Set up a new Tax Group (in IN06) that will incorporate the new tax code.
If you have exceptions in IN07, then you may need to add new records to control the exceptions for your new Tax Groups.
You can enter a test order in the Live Company, override the Tax Group to the new Tax Group and check in Folder 4 that the tax calculated properly.

Optional Testing in your Test Company for users not Maintaining Customer Data with iTopia:

Refresh your test company and test the new Tax set up in your test company. For details on refreshing your test company, please consult an SMB Support representative; if you are working with PointForce Enterprise versions 7.0 or higher, the test company refresh is not applicable.
Run the Tax Recode Utility (CC55) to recode the Tax Group in the Customer Master (SU13), Ship-To Addresses (SU14) and outstanding orders and quotes for applicable customers.
Process new invoices to confirm that the tax calculates at the new rate. Be sure to invoice old orders to confirm that they are taxed at the new rate and credit an old invoice to confirm that it credits at the old tax rate.

Optional Testing in your Test Company for users that are Maintaining Customer Data with iTopia:

If you have a test company, contact smbsupport@tecsys.com to arrange a company refresh and then proceed to test the new tax set up in your test company.
Change the Tax Group in the Customer Master (SU13) and Ship-To Addresses (SU14) files using Edit with Excel in your test company.
Run the Tax Recode Utility (CC55) to recode the Tax Group on outstanding orders and quotes for applicable customers.
Process new invoices to confirm that the tax calculates at the new rate. Be sure to invoice old orders to confirm they are taxed at the new rate and credit an old invoice to confirm that it credits at the old tax rate.

What to do ON the effective date of the Tax Rate change:

Be sure all invoices and credit notes that require the old rate have been processed and there are no open invoicing cycles: IN42/IN43/IN44
Do not enter any new orders unless you are prepared to manually override the Tax Group in the order header.
If applicable, shut down any processes that would feed an auto-generate order/invoice process. For example, Evolve, Order Stream, Radio Beacon/Accellos, EDI, etc.
Confirm all of your new Tax Codes, Tax Groups and Tax Exceptions do exist in your Live Company.
For users not maintaining customer data with iTopia (PFE version 6.0 or lower), run the Tax Recode Utility (CC55) for the applicable Province/State to recode the OLD Tax Group to the NEW Tax Group in the Customer Master (SU13), Ship-To Master (SU14) and open order file.
For users maintaining customer data with iTopia (PFE version 6.1 or higher), change the Tax Group in the Customer Master (SU13) and Ship-To Address (SU14) files using Edit with Excel and then run CC55 to recode the Tax Group in the open order file.
Begin entering new orders and invoicing.
Remember to turn any auto-generate order processes back on.
**TIP** You can spot check that the appropriate taxes are being calculated in Folder 4 of OE30/IN41/RS41.

What to Consider AFTER the effective date of the Tax Rate change:

Pay special attention when issuing credit notes to customers after the rate change date for invoices issued prior to the tax change date. First check if the original invoice was dated prior to the tax change date. If it was, then taxes were calculated on the original invoice using the old rates. Taxes on the credit note must match taxes on the original invoice.

Credits created using IN41-Auto Credit:
When using Auto Credit, the Tax Group assigned to the credit note header and detail lines defaults from Invoice History to the Tax Group on the original invoice. No overriding of the Tax Group should be required.
Credits created using IN41-Use RMA:
When using Use RMA, the Tax Group on the original invoice detail line is passed to the RMA detail line and subsequently passed to the credit note detail line. That means taxes on the credit note will match taxes on the original invoice. However, the Tax Group in the generated credit note header is set to the Customer’s current Tax Group (from SU13/SU14). This will need to be overridden if you ADD any product or supplementary charge detail lines to the credit note after the Use RMA generation.
Credits created Manually in IN41:
When creating a credit manually, the Tax Group in the Credit Note header will default to the Customer’s current Tax Group (from SU13/SU14). This needs to be overridden to the Tax Group that was used on the original invoice.
Overriding the Header Tax Group:
For information related to overriding the Header Tax Group, an Overriding the Header Tax Group section is included at the end of this topic.
**TIP** Always check the calculated taxes in Folder 4 before you exit the credit note. If there is any doubt as to whether or not the Tax Group is set properly in the detail line, you can check the Tax Group in the More Details window in Folder 3 or in the Supplementary Charge record and revise if required.
RMA’s for Multiple Products Returned:
When using IN67 to create an RMA you are selecting invoice detail lines from which goods are being returned. Be sure to check the invoice date (shown in the invoice display list box) and do not mix products belonging to a pre-rate change invoice with a post-rate change invoice on the same RMA. When that RMA turns into an order/invoice/credit note, it should not have mixed taxes on it.
- When the RMA is turned into a credit note, the appropriate Tax Group will need to be assigned to each credit note. You may wish to add a comment on the RMA if the original invoice was at the old rate as a reminder to override the Tax Group in IN41.
Accounts Payable – Input Tax Credit:
When invoices are entered into AP30 for a domestic vendor, the program applies the current tax rate to the entered invoice amount and calculates the tax amount included in the invoice total; this becomes the default GL distribution value to the Input Tax Credit account. The Tax Code that points to the tax rate is identified in program CC00-Accounts Payable, for Input Tax Credit 1 and Input Tax Credit 2.
- Change the Tax Code for Input Tax Credit 1 and/or Input Tax Credit 2 to point to your new Tax Code.
- It is very likely that you will still be entering pre-rate change invoices into AP30 after the rate change effective date. For those invoices, the Input Tax Credit amount(s) will be calculated at the new rate instead of the old rate and, therefore, will not match the actual tax charged on the invoice. In those cases, simply override the system generated GL distribution amount for tax in Folder 2.
- Alternatively, you could choose to change the Tax Code in CC00-Accounts Payable temporarily to a code that points to the old rate, process those pre-rate change invoices in a separate batch and then change the Tax Code back.

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Overriding the Header Tax Group

The Tax Group is stored in the order/invoice/credit note header. It is also stored in the product or supplementary charge detail line record if it was overridden on the detail line on the original invoice or if the product/supplementary charge qualified for Exception tax rules in IN07 on the original invoice.

If you return to Folder 1 after one or more detail lines have been created and override the Tax Group to a code that points to the desired tax rates, you will be prompted as follows (note that references to codes HST and GST are for example only):

"Lines Flagged as Override" refers to a Tax Override Flag stored in each detail line. On the original invoice:

If the Tax Group on the detail line on the original invoice was manually overridden, then the Tax Override Flag=Y.
If the product had Exception tax rules applied from IN07, then the Tax Group is different on that detail line but the Tax Override Flag is NOT set on the original invoice.

If using Auto Credit, the Tax Group and Tax Override Flag will be copied from Invoice History into the credit note detail lines the same as they were on the original invoice. If you choose Keep Override , the detail lines where the Tax Override Flag = Y (ie, manual overrides) will retain the Tax Group from the original invoice. All other detail lines will be taxed per the Tax Group entered on the Credit Note header.

If using Use RMA, program IN67 copied the Tax Group from Invoice History and set the Tax Override Flag=Y for ALL product detail lines on the RMA; that Tax Group and Tax Override Flag is passed to each detail line on the Credit Note created from the RMA. If you choose Keep Override, then the Tax Group will not be changed on any of the detail lines (because they are all flagged Tax Override=Y; those detail lines will retain the Tax Group from the original invoice).

If you are entering the credit note manually, then taxes are assigned according to the Tax Group in the credit note header and the Exceptions in IN07.

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