Sales Tax is used in the vast majority of purchases handled by Control. In some instances, however, Use Tax is charged instead. This page discusses Control's handling of Use Tax and how it can be setup to accommodate most users' needs.
Note: This discussion assumes an existing familiarity with Control. As such, it is targeted for an experienced user or implementer and is not intended as a step-by-step training guide for new users.
Overview
Taxes in Control are controlled by the following components:
Tax Accounts - These determine the rates charged by each tax authority.
Tax Classes - These group Tax Accounts and are applied to customers and orders.
Taxability Codes - These determine how products are taxed (usually whether they are taxable or non-taxable, but also what portion of them is taxable).
If we have a 5% usage tax that is not paid on the materials for an orderConsult your local tax laws on what usage tax applies to, as this varies by State. , you could set up Control to calculate the taxes in this manner:
Setup a GL Tax Account called “Usage at 5%” with a tax rate of 5%.
Setup a Tax Class called “Usage Tax - 5%” which includes this tax account.
Setup a Taxability Code called “Usage - No Materials” with the following settings:
Tax Exemption: Product is fully taxable
Item Taxable Amount: Use Formula
Item Subtotal Formula: SubTotalPrice - MaterialCost
Set the appropriate products' taxability code to “Usage Tax - 5%”.
Create an order for the product.
If the entire order's tax class is not “Usage Tax - 5%”, you can override the line item tax class on the Advanced tab during order entry.
Estimate v Actual Costs
In the overview, the products taxable amount will exclude the (Estimated) Material Costs. Control can calculate taxes on Actual costs (using the formula “SubTotalPrice - ActualMaterialCost”), but this is not recommended unless required by your local tax code for the following reasons:
Taxes are not known ($0.00) initially (since Actual Costs are zero initially) and build up as the order is created.
The taxes will change each time material is posted on the job (as it should under this configuration). This is typically confusing to the user and generates some very hard-to-follow tax reports.
When parts are added to a job after the first tax report is run, it results in a decreasee in taxes on the subsequent taxes since you are removing the usage tax for the additional materials added. Despite being able to understand the theory, in practice this tends to cause a lot of confusion in interpreting tax reports.
You should check the box under part setup called ReCalculate Price on Status Change to ensure that taxes are recalculated at every step along the way. This can slow status changes down a bit, but is necessary to arrive at the correct tax amount.
For these reason, most companies have left the usage tax based on the Estimated Tax.
Mixed Sales and Use Tax
Some companies can switch your entire tax system to Usage Tax. Others may need only Sales Tax. Still others, use both.
By default, Control is setup for standard Sales Tax and there is little to do.
If you are switching everything to Use Tax, modify the procedure above to change the “Goods” taxability code to use the appropriate tax formula. This will handle almost all of the cases you need!
If you are are using both, you will need to follow the procedure above. More sophisticated (and automatic) solution can be developed using more complex CFL. Since any CFL statement is valid to calculate the taxable amount, almost any situation can be handled. Doing so, however, usually requires the skills of an implementer and is beyond the scope of this document.