Sales tax calculations

Sales tax rates and the rules for calculating sales tax differ from region to region and change frequently. Many service providers have tax calculation processes in their accounting systems or have interfaces between their accounting systems and commercial products that calculate tax.

The Customer Billing application has fields that you can use to add custom tax calculations. You can also connect with a product that calculates sales tax. Sales tax is often calculated by using information such as the type of revenue and the address where the service is rendered. Service Provider includes data fields that you can use to manage this information. Service Provider does not, by default, perform sales tax calculations.

A service provider might be responsible for calculating, in one transaction, a city tax by using one tax rate, and a county tax by using a different tax rate. In such situations, commercial products that calculate tax often include address validation. Address validation ensures that sales tax is calculated correctly. When addresses are validated, a code is often provided to indicate the various taxing jurisdictions. This code is used to calculate the total tax to be charged to the customers and to facilitate storage of the tax liability for each jurisdiction. In Service Provider, this code is the GEO code. It is part of the service address.

Because the service address is copied to the ticket or work order, the GEO code is also included on all detail transactions that are sent to the accounting system. These detail transactions include the price that was calculated according to the price schedule for the customer agreement. These detail transactions include additional fields that can store calculated taxes for up to six tax jurisdictions for each transaction.

Tax calculations are performed after the transactions are entered in the accounting system. Each transaction has the following information that is used in the calculation:

• taxing geographical code
• the type of revenue:
  • labor (including labor type)
  • material (including commodity)
  • service (including type of service)
  • tool usage (including commodity)

After the taxes are calculated, the results of the calculation can be stored in the additional tax fields in the detail records.