Adjusting tax on credit memos

There are two methods for calculating sales tax on credit memos. Choose the option that works best for you. 

Credit amount entered includes sales tax

 NOTE: Use this method if the credit amount you enter includes the sales tax. For example, the credit is 25.00 of which 23.81 credits the sales account and 1.19 is sales tax. 

1. AR, Transactions, Credit Memos and select the customer.
2. Select the invoice to apply the credit.
3. Enter the amount of the credit including the sales tax, then select the Distribution button.
4. Zero out the amount in Sales adjustment, then distribute to the appropriate accounts.
5. Uncheck the Change credit memo checkbox, then click the Calculate Tax button.
6. OK the message SALES TAX REPORTING HAS CHANGED.
    NOTE: The amount distributed to the sales tax reduces the amount allocated to the sales account, miscellaneous charge, or freight. 
    
   
7. Click OK to return to the credit memo header screen.
8. Select Tax Reporting to review the taxable and nontaxable changes.

The credit amount entered doesn't include sales tax

 NOTE: Use this method if the sales tax credit is in addition to the credit amount you entered. 

1. AR, Transactions, Credit Memos and select the customer.
2. Select the invoice to apply the credit.
3. Enter the amount of the credit, then select the Distribution button.
4. Zero out the amount in Sales adjustment, then distribute to the appropriate accounts.
5. Check the Change credit memo checkbox, then click the Calculate Tax button.

OK the message SALES TAX REPORTING HAS CHANGED.
 NOTE: The amount distributed to the sales account, miscellaneous charge, or freight remains unchanged. The new balance in the Amount field equals the original amount entered plus the calculated sales tax. 

1. Click OK to return to the credit memo header screen.
2. Select Tax Reporting to review the taxable and nontaxable changes.       

Adjusting tax on debit memos

 NOTE: Use this method to increase the balance on a taxable invoice. Create a debit memo for the sum of the sales and sales tax increase.

1. Select A/R, Transactions, Debit Memos and select the customer.
2. Select the invoice to apply the debit memo.
3. Enter the amount of the debit to increase the invoice.
    EXAMPLE: If the sales increase is $25.00 and the sales tax increase is $1.25, the debit memo amount is $26.25.   
   
4. Select the Distribution button.
5. Zero out the Sales adjustment field.
6. Distribute to the appropriate sales accounts and enter the tax amount for the increase.
   
7. Click OK.
8. The message SALES TAX REPORTING HAS CHANGED displays. Click OK on the message.
9. Press OK to return to the Debit Memo header screen.
10. press the Tax Reporting button to review the taxable and nontaxable amount changes.

Troubleshoot Sales Tax adjustments

• Review how to understand the distribution of sales tax reporting on A/R credit or debit memos
• The distribution amounts didn't change after clicking the Calculate Tax button
  • Not all line items on the original invoice were taxable. Unless all line items are taxable, the system doesn't know how to calculate tax on the credit memo
  • The distribution of the credit memo is in a nontaxable category. Sage BusinessWorks calculates sales tax on amounts distributed to sales accounts, charges, or freight

The table below shows how the system calculates the numbers on the Tax Reporting screen.