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How to: Set Up Use Tax and Purchase Tax

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Sales tax includes taxes that companies pay for using items:

  • Use tax (United States) – Use tax is a United States sales tax that is paid on items that are purchased by a company and are used by that company instead of being sold to a customer. The company must pay sales tax for those items to the government, in the form of use tax.

  • Purchase tax (Canada) – Purchase tax is a Canadian sales tax that is paid by a company on items that are purchased from a vendor. When a company purchases items for use by the company itself, the vendor charges the appropriate sales tax for the items.

To set up use tax for a purchase order

  1. In the Search box, enter Purchase Orders, and then choose the related link in Order Processing.

  2. In the Purchase Orders window, on the Home tab, in the New group, choose New.

  3. On the Lines FastTab, fill in the fields as described in the following table.

    Field Description

    Tax Area Code

    The tax area code of the vendor.

    Use Tax

    Select to calculate use tax on the purchase line.

    Tax Liable

    Select to set up tax liability for the vendor.

  4. On the Invoicing FastTab, fill in the fields as described in the following table.

    Field Description

    Tax Liable

    Select to set up tax liability.

    Hh930877.Important(en-us,NAV.90).gifImportant
    This field is available in the Purchase Header window, but it is not shown by default. To select the field, you must first add the column that shows this field. For more information, see Personalize the User Interface.

    Tax Area Code

    The tax area code of the vendor.

    Hh930877.Important(en-us,NAV.90).gifImportant
    This field is available in the Purchase Header window, but it is not shown by default. To select the field, you must first add the column that shows this field. For more information, see Personalize the User Interface.

    Tax Exemption No.

    The company's tax exemption number. You can enter a maximum of 30 alphanumeric characters.

    Hh930877.Important(en-us,NAV.90).gifImportant
    This field is available in the Purchase Header window, but it is not shown by default. To select the field, you must first add the column that shows this field. For more information, see Personalize the User Interface.

    Provincial Tax Area Code

    The tax code for the province.

    Hh930877.Important(en-us,NAV.90).gifImportant
    This field is available in the Purchase Header window, but it is not shown by default. To select the field, you must first add the column that shows this field. For more information, see Personalize the User Interface.

  5. Choose the OK button.

To set up use tax details

  1. In the Search box, enter Tax Details, and then choose the related link.

  2. In the Tax Details window, on the Home tab, in the New group, choose New.

  3. In the New - Tax Details window, fill in the fields as described in the following table.

    Field Description

    Tax Jurisdiction Code

    The tax jurisdiction code for the tax detail entry.

    Tax Group Code

    The tax group code for the tax detail entry.

    Tax Type

    Sales and Use Tax – To apply both sales tax and use tax to the tax detail entry.

    –or–

    Excise Tax – To apply excise tax to the tax detail entry.

    –or–

    Sales Tax Only – To apply only sales tax to the tax detail entry.

    –or–

    Use Tax Only – To apply only use tax to the tax detail entry.

  4. Choose the OK button.

To set up purchase tax for a company

  1. In the Search box, enter Company Information, and then choose the related link.

  2. In the Company Information window, on the Tax FastTab, fill in the fields as described in the following table.

    Field Description

    Tax Area Code

    The company's tax area code. The tax area code is used in conjunction with a tax group code field and the Tax Liable field to find the necessary information for calculating sales tax.

    Tax Exemption No.

    The company's tax exemption number. You can enter a maximum of 30 alphanumeric characters.

    Provincial Tax Area Code

    The tax code for the province.

  3. Choose the OK button.

To set up purchase tax for a location

  1. In the Search box, enter Locations, and then choose the related link.

  2. In the Locations window, select the required location. On the Home tab, in the Manage group, choose Edit.

  3. On the General FastTab, fill in the fields as described in the following table.

    Field Description

    Do Not Use For Tax Calculation

    Select to specify whether the tax information included on this location record is to be used for sales tax calculations on purchase documents.

    Tax Area Code

    The tax area code for the location. The tax area code is used in conjunction with a tax group code field and the Tax Liable field to find the necessary information for calculating sales tax.

    Tax Exemption No.

    The company's tax exemption number. You can enter a maximum of 30 alphanumeric characters.

    Provincial Tax Area Code

    The tax code for the province.

  4. Choose the OK button.

To set up purchase tax for non-recoverable tax

  1. In the Search box, enter Tax Details, and then choose the related link.

  2. In the Tax Details window, on the Home tab. In the New group, choose New.

  3. Select the Expense/Capitalize check box.

    Note

    This check box must be selected if the tax paid is not recoverable.

  4. Choose the OK button.

See Also

Tasks

How to: Set Up Sales Tax
How to: Set Up Sales Tax Groups
How to: Set Up Sales Tax Jurisdictions
How to: Set Up Unrealized Sales Tax and Sales Payment Discounts
How to: Set Up Sales Tax Details

Other Resources

How to: Enter Company Information
How to: Set Up Locations