Complete the process outlined to set up and use sales tax in Accounts Receivable and Billing.

When you set up taxes, these apply to all future billings, including those for existing contracts. If you don't want existing contracts to be taxable, assign an exempt/non-taxable group to each contract item.

Some settings reference Accounts Payable because Accounts Receivable and Accounts Payable share the same tax files.

Create the Tax Master File

Choose an option below to create the Tax Master file, depending on whether or not you use finance charges in Accounts Receivable.

Using finance charges

1. Go to Accounts Receivable, File, Company Settings, AR Settings.
2. In the Tax usage section, select the Tracking taxes checkbox, and then click OK.
3. Click OK to the message "Tax master file not found. Verification will not occur."
4. Click OK to the message "Required field is missing."
5. In the AR Settings Finance Charge Settings window, type EXMPT in the Tax group box. You don’t have to set up the EXMPT tax rate.
6. Click OK twice to save your changes and exit.

Not using finance charges

1. Go to Accounts Receivable, File, Company Settings, AR Settings.
2. Select the Tracking taxes checkbox under Tax usage.
3. Click OK to save your changes and exit.

Set up your tax rates

1. Go to Accounts Receivable, Setup, Taxes, Tax Rates.
2. Click Yes or No as appropriate if you receive a message about Property Management taxes. "Cannot determine if this data directory will be using taxes with Property Management, because the Property Management System file was not found. Will the taxes in this data directory be used with Property Management?"
3. In the Tax box, type the tax ID.
4. In the Description box, type a description for the tax.
   • This description displays when you click List while setting up a tax group.
5. Enter the tax rate percentage. Enter the rate with a decimal (for example, enter 6 as 6.0).
6. Select a state or area value for the tax from the State list, if it appears. You can use the State information for reporting all taxes by state or area.
   • If your desired state doesn’t appear, change the TX State list.
7. Enter a Debit account.
   • This field appears if you’re tracking taxes in Accounts Payable.
   • Required if you select Exclude AP tax in amount sent to Job Cost, Equipment Cost, and/or Billing.
8. Enter a Credit account. Sage uses this account for tax liability (credit) transactions.
9. Enter a Retainage debit account if you want tax retainage to debit a different account.
   • If you enter an account in this field, select the Tracking tax retainage in AP checkbox.
   • This field appears if you’re tracking Accounts Payable taxes.
10. Enter a Retainage credit account if you want tax retainage to credit another account than the Credit account.
    • This field appears if you select the Tracking tax retainage box in Accounts Receivable. It also appears if you're tracking tax liability in Accounts Payable.
11. Check the Exclude AP tax in amount sent to Job Cost, Equipment Cost, and/or Billing box, if needed.
12. Check the Tracking tax retainage in AP box to track tax and tax liability on Accounts Payable invoices.
    • Check this box if you entered a Retainage debit account above.
13. Check the Exclude AR tax in amount sent to Job Cost, Equipment Cost, and/or Billing box, if needed.
14. If you’re tracking tax retainage on Accounts Receivable invoices, check the Tracking tax retainage in AR checkbox.
15. Click Save.
    • If you change an existing tax rate, it automatically updates the tax groups associated with the tax rate.
    • You have the option of viewing the affected groups.
16. Click Close when you have finished setting up all your tax rates.

Set up your tax groups

1. Go to Accounts Receivable, Setup, Taxes, Tax Groups.
2. In the Group box, type the tax group ID.
   • You can use an alphabetical or numerical coding scheme for your tax group IDs.
3. In the Description box, type the description for the tax group.
   • This description displays when you click List during an invoice entry.
4. If you want to compound the tax rates, mark the Compound Tax Rates box.
   • If you select this box, it compounds the tax rates on all distributions using this tax group.
   • For example, you have a $100.00 distribution with a tax group containing two tax rates: Tax A = 10 and Tax B = 20. Tax A is $10.00. Tax B calculates as the distribution amount plus the tax amount calculated for Tax A. Tax B calculates based on $110.00, making it $22.00. This results in a total tax liability of $32.00.
5. Enter the tax ID for each tax rate you want to include in this tax group. You can include up to nine taxes.
   • You can click List to select a tax rate ID.
   • It displays the tax rate description on the right for verification.
   • Select the State or area value for which this tax group applies.
   • You can leave this box blank. It will prefill based on the first tax rate you select for this tax group.
   • You can't change this field once you select it.
6. When you add a new tax rate, you'll receive a confirmation to add it. Click OK to open the Add Tax window. Enter the information for the new tax rate and click OK.
7. Verify the tax group total. The total of all tax rates included in the group appears above the entry box.
8. Click Save to save the tax group.
9. Click Close when you have finished setting up tax groups.