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Microsoft Dynamics AX Sales Tax Setup

In this Article, we are going to discuss the Microsoft Dynamics AX Sales Tax Setup and with some live Examples.

In Microsoft Dynamics AX, there are several elements to create for the Dynamics AX Sales Tax functionality:

  • Ledger posting group: this element contains all the ledger accounts.
  • Sales tax code: this element contains all the sale tax rate and the calculation method (rounding).
  • Sales tax group: this element is the link between the sales tax code and the customer/vendor.
  • Item sales tax group: this element is the link between the sales tax code and item.
  • Sales tax settlement period: this element contains the period of payment of sales tax.
  • Sales tax authority: this element is linked to a settlement period. It can be linked to a vendor to automize payment.

To set up the AX Sales Tax, Follow the Order Below:

Step 1: Ledger Posting Group

The Access: General Ledger > Setup > Sales tax > Ledger posting groups

  • Click new to create the new ledger, posting group.
  • Inside the field “ledger posting group”: enter a unique code.
  • In the field “description”: enter a description.
  • On the General tab, enter ledger account to use.

Description of the accounts:

  • Sales tax payable: account used in the customer invoice. It is the sale tax to pay the authority.
  • Sales tax receivable: account used in the vendor invoice. It is the tax that is deductible.
  • Use tax expense: account use when sales tax is due on payment and not on the customer invoice.
  • Use tax payable: account use when sales tax is due on payment and not on the vendor invoice.
  • Settlement account: account used for payment of the tax.
  • Vendor cash discount: account number of the cash discount payable.
  • Customer cash discount: account number of the cash discount granted.

Step 2: AX Sales Tax Authority

The Access: General Ledger > Setup > Sales tax > Sales tax authorities

  • Click new to create the new sales tax authority. You just created one at least.
  • Enter code in the “Authority” field
  • Enter a name/description in the “Name” field.
  • You can link authority to a vendor account.

Step 3: AX Sales Tax Settlement Period

The Access: General Ledger > Setup > Sales tax > Sales tax settlement periods

  • Click new to create a new AX Sales Tax settlement period.
  • Enter code in the “Settlement period” field
  • Enter a description
  • Select the Terms of payment (link to the AP>Setup>Payment>Terms of payment screen)
  • Select the authority created in the preceding step.
  • Choose you period interval and number of units: Months/1 for a monthly payment, Months/3 for a payment every quarter…
  • Create the first single period (select from the date and to date) and click on “New period” button in the top of the screen to create the next periods.

Add the last step in the task list of the end of the year to create all the single periods of the new year.

Step 4: AX Sales Tax Codes

The Access: General Ledger > Setup > Sales tax > Sales tax codes

  • Click on New to create the new sales tax code
  • Enter the sales tax codes (choose a short one if you want to print it in a statement).
  • Enter the full name in the “Name” field.
  • Select the settlement period (created in step 3).
  • Then select the ledger posting group for this code (created in step 1).
  • And select other option: currency, print code, calculations parameters.
  • Click on “Values” to add a rate.
  • You don’t need to enter the dates for the first rate (if there is only one rate).
  • You can enter a rate by the amount range, and choose the option “interval” in the calculation method.
  1. If the rate of the sales tax change, you don’t have to create a new code, but just add a new rate in the value screen with the start date, and include an end date to the old rate.
  2. When you create the sales tax code, don’t put the rate in the name, because the rate can change.

Step 5: AX Sales Tax Group

The Access: General Ledger > Setup > Sales tax > Sales tax groups

To identify the number of the group you need, look for the criteria of the application of the sales tax related to the customer or the vendor. Example: the national or international customer, the vendor with VAT on invoice or VAT on cash receipt, the vendor of goods or fixed assets vendor.

  • Click New to create the new sales tax group.
  • Enter the code of the sales tax group.
  • Enter a description.
  • In the tab “Setup” add all the sales tax codes that can be suitable for a sales tax group.
  • The sales tax group will be the link to the vendor/customer by the vendor/customer group or directly on the vendor/customer screen.

Step 6: Item Sales Tax Group

The Access: General Ledger > Setup > Sales tax > Item sales tax groups

To identify the number of groups you need, look for criteria of the application of the sales tax related to the items. Example: the item with the normal rate or with the reduced rate, exempted item.

  • Click New to create the new item sales tax, group
  • Enter the code to the item sales tax group.
  • Enter a description.
  • In the tab “Setup” add all sales tax codes that can be suitable for the item sales tax group.
  • The item sales tax group can be linked to the item or to a general account (if the account is set up at the organization level).

Example for Customer Invoices

ABC company need 4 sales tax codes for customer invoices:

  • The Sales tax with the normal rate for the national customer (code STNN)
  • In sales tax with a normal rate for an international customer (code STIN)
  • The sales tax with a reduced rate for a national customer (code STNR)
  • A sales tax with the reduced rate for an international customer (code STIR)

We need to create the 2 sales tax groups :

  • One group for national customers (code CN): with the sales tax codes STNN & STNR
  • One group for international customers (code CI): with the sales tax codes STIN & STIR

We need to create the 2 item sales tax groups:

  • One for normal rate (code IN): with the sales tax codes STNN $ STIN
  • For the reduced rate (code IR): with the sales tax codes STNR & STIR

Sales tax code deduced from the sale to a national customer:

 

Conclusion

In this Article, we dealt with Dynamics AX sales tax setup and its working towards various sales tax process and its Examples.

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