Troubleshooting Sales Tax Amounts and Calculations

By |2021-07-30T11:22:09-05:00January 28th, 2021|Comments Off on Troubleshooting Sales Tax Amounts and Calculations

This KB Article Talks About How to Troubleshoot:

  1. Sales tax amounts or calculations that seem incorrect.
  2. Sales tax does not match my hand calculations.
  3. Sales tax by line item vs. Sales tax by subtotal.

Introduction

Total Office Manager is designed with the ability to calculate sales tax by the line item.  Each line on the financial document can be assigned a sales tax item.  This allows the ability to tax each line of the transaction at different rates or not at all.  Sales Tax is then calculated, rounded to a currency value (two decimal places) and written individually to the General Journal.  Since rounding is completed on the calculation on each line a variance can occur, with certain values, when compared to calculating the sales tax on the subtotal.

 

Sales Tax by Line Item
             Amount Tax    Rate Values without Rounding Rounded values that go into the register for tax payable
Item 1 $157.50 7.88% 12.411 12.41
Item 2 $5.00 7.88% 0.394 0.39
Subtotal $162.50 Total Sales tax $12.80
Sales Tax $12.80
Total $175.30
Sales Tax by Subtotal
             Amount Tax Rate Values without Rounding Rounded values that go into the register for tax payable
Item 1 $157.50
Item 2 $5.00
Subtotal $162.50
Sales Tax $12.81 7.88% 12.805 12.81
Total $175.31

 

When this occurs you can correct this variance with the following two options:

Option #1 – No Sales Tax Groups

  1. When entering the Invoice Items, do not select a Tax Item for each line entry.
  2. For all lines that are taxable, select a taxable Tax Code.
  3. After all Invoice Items are entered, select a Subtotal item.
  4. On the line after the Subtotal, select the Sales Tax Item that you would normally select in the Tax Item column. This will calculate the Sales Tax on the subtotal just as the technician did in the field.
  5. Please note, non-taxable items will need to be grouped together and subtotaled in order to calculate the Sales Tax strictly on the taxable items. For the non-taxable entries, you would select the appropriate Tax Item in the column just as you normally would.

Option #2 – With/Without Sales Tax Groups:

Create an Invoice Item that is an Other Charge type. This item will be used strictly for Sales Tax rounding discrepancies. It is recommended that the account you select in the Income Account field is one that is solely for the purpose of tracking these types of transactions.

Enter your invoice information just as you normally would, selecting the appropriate Tax Item in the column.

After all Invoice Items are entered, select an Other Charge item that is referenced in Option #2 Step #1.

When using Option #2, you may need to make adjustments to your Sales Tax Liability before a payment is created. In order to determine the amount to adjust, you will need to do the following:

  1. Run the Transaction Details by Account report for the account that is selected in the Income Account of the Invoice Item that was created under Option #2.
  2. If the amount that appears in the account details does not equal zero, an adjustment should be made.
  3. A Sales Tax Adjustment will need to be made to either increase or decrease the amount of liability prior to making your Sales Tax payment. In the example below, the TDBA indicates that there is an adjustment -$0.01 that is outstanding in the Sales Tax Adj account.
  4. To create a Sales Tax Liability Adjustment, navigate to Customers | Sales Tax | Sales Tax Liability Adjustment.
  5. Enter the date the adjustment is effective. This date should coincide with the dates of the Sales Tax Liability you are paying.
  6. Enter a unique Entry No, if desired
  7. Select the Vendor you are adjusting the liability for.
  8. Select the Sales Tax item you are making the adjustment for.
  9. Select the account that is selected in the Income Account of the Invoice Item that was created under Option #2 as the Adjustment Account.
  10. 10.Select to Increase or Decrease the amount based on the value that appears in the TDBA report.
  11. Enter a detailed memo to indicate why this adjustment is being made.
  12. After entering the adjustment, proceed with paying your Sales Tax Liability as normal.

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HVAC Electrical Plumbing Software

Aptora delivers a true All-In-One services software solution including CRM, accounting, payroll, inventory, vendors, sales, marketing, dispatch, flat rate pricing, and more. NO 3rd party plugins or integrations required. Created by contractors for contractors, we know what it takes to grow your services-based businesses.

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