Understanding tax jurisdictions and sales tax codes
Sales tax codes and tax jurisdictions help you combine and organize important information on the taxes that your customers, distributors, and vendors pay on your items, and what you do with the taxes.
After you create sales tax codes, you further combine these codes into tax jurisdictions. You apply jurisdictions throughout Made2Manage to show what combination of taxes a customer, vendor, or distributor pays—or what grouping of taxes you pay when you purchase items.
For instance, you plan to sell items to a potential customer Someone who agrees to buy goods from you. in the state of Wisconsin. This customer pays federal (U.S.) taxes, state (Wisconsin) taxes, and one or more local taxes to the city or county. You create sales tax codes for each of these taxes, including the tax rate for each tax authority, how you calculate each tax, the general ledger accounts affected, and so on. Then you further combine the sales tax codes into a grouping, or a jurisdiction A grouping of sales tax codes. of codes.
After you create the sales tax codes and combine them into a jurisdiction, you can view the jurisdiction from the potential customer’s quotation, sales order, or address record A complete unit of related data items stored in named fields in a database table. A record contains all the information for a single item, such as a single sales order. to see what set of taxes the customer pays.
Jurisdictions work in two ways, depending on your company’s location:
-
If your company is located in a region that uses geography-based taxes, you create and assign jurisdictions based on customer and vendor (Also called supplier) A business from which you purchase goods or services.addresses.
-
If your company is located in a region that uses product-based taxes, you create and assign jurisdictions based on itemsA manufactured or purchased part, material, subassembly, or product. in the item master. You must select “Use European Product Classification Tax Jurisdictions” in the general ledger (GL) A set of numbered accounts that record all accounting transactions. The general ledger typically has accounts for revenue, cost of goods sold, expenses, assets, liabilities, shareholders equity, and revenue. to use product-based taxes.