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Epicor ERP

Tax Engine Course


10.0.700.2

Disclaimer
This document is for informational purposes only and is subject to change without notice. This document and its
contents, including the viewpoints, dates and functional content expressed herein are believed to be accurate as of its
date of publication. However, Epicor Software Corporation makes no guarantee, representations or warranties with
regard to the enclosed information and specifically disclaims any applicable implied warranties, such as fitness for a
particular purpose, merchantability, satisfactory quality or reasonable skill and care. As each user of Epicor software is
likely to be unique in their requirements in the use of such software and their business processes, users of this document
are always advised to discuss the content of this document with their Epicor account manager. All information contained
herein is subject to change without notice and changes to this document since printing and other important information
about the software product are made or published in release notes, and you are urged to obtain the current release
notes for the software product. We welcome user comments and reserve the right to revise this publication and/or
make improvements or changes to the products or programs described in this publication at any time, without notice.
The usage of any Epicor software shall be pursuant to an Epicor end user license agreement and the performance of
any consulting services by Epicor personnel shall be pursuant to Epicor's standard services terms and conditions. Usage
of the solution(s) described in this document with other Epicor software or third party products may require the purchase
of licenses for such other products. Where any software is expressed to be compliant with local laws or requirements
in this document, such compliance is not a warranty and is based solely on Epicor's current understanding of such laws
and requirements. All laws and requirements are subject to varying interpretations as well as to change and accordingly
Epicor cannot guarantee that the software will be compliant and up to date with such changes. All statements of
platform and product compatibility in this document shall be considered individually in relation to the products referred
to in the relevant statement, i.e., where any Epicor software is stated to be compatible with one product and also
stated to be compatible with another product, it should not be interpreted that such Epicor software is compatible
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Epicor has no responsibility for compatibility issues which may be caused by updates, patches and/or service packs
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Epicor Software Corporation.

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Tax Engine Course

Contents

Contents
Tax Engine Course..................................................................................................................6
Before You Begin....................................................................................................................7
Audience.........................................................................................................................................................7
Prerequisites....................................................................................................................................................7
Environment Setup..........................................................................................................................................7

Application Setup...................................................................................................................9
Tax Allocation................................................................................................................................................10
Tax Type.................................................................................................................................................11
Collection Method...........................................................................................................................12
Tax Timing.......................................................................................................................................13
Payment Discount Treatment...........................................................................................................14
Product Tax Category.............................................................................................................................15
Tax Liability.............................................................................................................................................15
Tax Exemptions.......................................................................................................................................16
Custom Tax Algorithms..........................................................................................................................16
Legal Text...............................................................................................................................................18
Cents Override........................................................................................................................................18
Tax Report Category...............................................................................................................................19
Tax Jurisdiction.......................................................................................................................................19
Tax Authority..........................................................................................................................................19
Tax Entries.....................................................................................................................................................20
Invoice Entry...........................................................................................................................................20

Scenario 1: Implement a Self-Assessment Purchase Tax...................................................21


Implementation Steps....................................................................................................................................21
Workshop - Create a Standard Tax Type.................................................................................................21
Create a VAT Tax Type....................................................................................................................21
Create a Rate Code.........................................................................................................................22
Create an Effective Rate..................................................................................................................22
Assign and Edit a GL Control...........................................................................................................22
Create a Reduced VAT Rate.............................................................................................................23
Assign a GL Control.........................................................................................................................23
Workshop - Create a Fixed Asset Tax Type..............................................................................................25
Create a Tax Type............................................................................................................................25
Create a Rate Code.........................................................................................................................25
Create an Effective Rate..................................................................................................................25
Assign a GL Control.........................................................................................................................25
Create Reduced VAT Rate................................................................................................................26
Workshop - Set Up Tax Liabilities............................................................................................................27
Create a Tax Liability........................................................................................................................27
Assign a Tax Type to a Liability.........................................................................................................27

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Contents

Tax Engine Course

Create a Fixed Asset Tax Liability......................................................................................................27


Assign a Fixed Asset Tax Type to a Liability.......................................................................................28
Assign a Tax Liability to Suppliers.....................................................................................................28
Workshop - Enter AP Invoices.................................................................................................................29
Create an Invoice Header.................................................................................................................29
Create an Invoice Line.....................................................................................................................29
Create a Second Invoice..................................................................................................................30
Create the Invoice Line....................................................................................................................30
Post Invoices....................................................................................................................................31
Workshop - Review the AP Invoice Tracker..............................................................................................31
Review Tax Transactions..................................................................................................................31

Scenario 2: Apply a Custom Tax Algorithm........................................................................32


Implementation Steps....................................................................................................................................32
Workshop - Adjust the VAT Tax Type......................................................................................................32
Workshop - Create a Custom Tax Algorithm...........................................................................................34
Create a Custom Algorithm ID.........................................................................................................34
Create Algorithm Lines....................................................................................................................34
Workshop - Create the Luxury Tax Type..................................................................................................36
Create the Tax Type.........................................................................................................................36
Create a Rate Code.........................................................................................................................36
Create an Effective Rate..................................................................................................................36
Assign a GL Control.........................................................................................................................37
Workshop - Set Up a Tax Liability............................................................................................................38
Create a Tax Liability........................................................................................................................38
Assign Tax Types to a Liability..........................................................................................................38
Assign a Tax Liability to a Customer.................................................................................................38
Workshop - Enter an AR Invoice..............................................................................................................39
Create an Invoice Header.................................................................................................................39
Create an Invoice Line.....................................................................................................................39
Review the Tax and Post the Invoice................................................................................................39

Scenario 3: Set Multiple Rates, Exemptions, and Tax Categories.....................................41


Implementation Steps....................................................................................................................................41
Workshop - Create Tax Types.................................................................................................................41
Create a VAT Tax Type....................................................................................................................42
Create a Rate Code.........................................................................................................................42
Create an Effective Rate..................................................................................................................42
Select a GL Control..........................................................................................................................42
Create a Reduced VAT Rate.............................................................................................................43
Create a Perception Tax Type...........................................................................................................43
Create a City Tax Type.....................................................................................................................45
Create a Local Tax Type...................................................................................................................46
Workshop - Set Up a Tax Liability............................................................................................................47
Create the Tax Liability....................................................................................................................47
Assign Tax Types to the Tax Liability.................................................................................................47

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Tax Engine Course

Contents

Assign the Tax Liability to a Customer..............................................................................................47


Workshop - Create Product Tax Categories.............................................................................................49
Create an Exempt Category.............................................................................................................49
Create a Utilities Category...............................................................................................................49
Assign a Tax Category to Parts.........................................................................................................50
Enter an Exemption in Tax Types......................................................................................................50
Workshop - Enter Sales Invoices..............................................................................................................51
Create an Invoice Header.................................................................................................................51
Create Invoice Lines.........................................................................................................................51
Review the Tax and Post the Invoice................................................................................................51

Reports..................................................................................................................................53
Sales Tax Report.............................................................................................................................................53
Use Tax Report...............................................................................................................................................53
VAT On Settlement Report.............................................................................................................................53
Withholding Tax Certificate............................................................................................................................54

Conclusion.............................................................................................................................55

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Tax Engine Course

Tax Engine Course

Tax Engine Course


This course is designed to review the concepts and tools available for tax setup and functionality in the Epicor
application. Topics covered include tax setup and the various processes which utilize the tax engine.
Hands-on workshops are included in this course to guide you through the tax setup steps and processes.
Upon successful completion of this course, you will be able to:
Set up Tax Rates, Tax Types, Tax Liabilities, and Product Tax Categories.
Use Custom Tax Algorithms.
Implement tax setups according to some regional or national requirements.
Run various tax reports.

Epicor ERP | 10.0.700.2

Tax Engine Course

Before You Begin

Before You Begin


Read this topic for information you should know in order to successfully complete this course.

Audience
Specific audiences will benefit from this course.
CFO/Controller
AP Clerk
AR Clerk

Prerequisites
To complete the workshops in this course, the necessary modules must be licensed and operating in your training
environment. For more information on the modules available, contact your Epicor Customer Account Manager
at EpicorCAM@epicor.com. It is also important you understand the prerequisite knowledge contained in other
valuable courses.
Accounts Payable Course This course is designed to review the concepts and reporting tools available in
the Accounts Payable (AP) module. Topics of discussion include maintenance program setup and the creation
and payment processes for various invoice types. This course also describes how AP invoices and payments
impact the general ledger (GL).
Accounts Receivable Course This course reviews the Accounts Receivable (AR) module's concepts and
reporting tools. Topics of discussion include maintenance program setup, various AR processes, and how to
recognize the impact these processes have on the general ledger (GL). Throughout the course, hands-on
workshops guide you through these topics.
General Ledger Course This course provides a clear perspective of the maintenance programs, concepts,
processes, and reporting tools you encounter as you work within the General Ledger (GL) module.

Environment Setup
The environment setup steps and potential workshop constraints must be reviewed in order to successfully
complete the workshops in this course.
Your Epicor training environment, in which the Epicor demonstration database is found, enables you to experience
Epicor functionality in action but does not affect data in your live, production environment.
The following steps must be taken to successfully complete the workshops in this course.

Epicor ERP | 10.0.700.2

Before You Begin

1.

Tax Engine Course

Verify the following or ask your system administrator to verify for you:
Your Epicor training icon (or web address if you are using Epicor Web Access) points to your
Epicor training environment with the Epicor demonstration database installed. Do not complete
the course workshops in your live, production environment.
Note It is recommended that multiple Epicor demonstration databases are installed. Contact
Support or Systems Consulting for billable assistance.
The Epicor demonstration database is at the same service pack and patch as the Epicor
application. Epicor's education team updates the Epicor demonstration database for each service pack
and patch. If your system administrator upgrades your Epicor application to a new service pack or patch,
he or she must also download the corresponding Epicor demonstration database from EPICweb > Support
> Epicor > Downloads and install it. If this is not performed, unexpected results can occur when completing
the course workshops.
Your system administrator restored (refreshed) the Epicor demonstration database prior to
starting this course. The Epicor demonstration database comes standard with parts, customers, sales
orders, and so on, already defined. If the Epicor demonstration database is shared with multiple users
(that is, the database is located on a server and users access the same data, much like your live, production
environment) and is not periodically refreshed, unexpected results can occur. For example, if a course
workshop requires you to ship a sales order that came standard in the Epicor demonstration database,
but a different user already completed this workshop and the Epicor demonstration database was not
restored (refreshed), then you will not be able to ship the sales order. Epicor's education team has written
the course workshops to minimize situations like this from occurring, but Epicor cannot prevent users
from manipulating the data in your installation of the Epicor demonstration database.

2.

Log in to the training environment using the credentials manager/manager. If you are logged in to your
training environment as a different user, from the Options menu, select Change User.

3.

From the Main menu, select the company Epicor Education (EPIC06).

4.

From the Main menu, select the Main site.

Epicor ERP | 10.0.700.2

Tax Engine Course

Application Setup

Application Setup
Use the Global Tax Engine functionality to define tax codes, tax rates, liability timing, and custom tax algorithms.
This functionality is flexible; you can define tax parameters for nearly every country in which your company does
business.
This section of the course reviews common maintenance programs used to set up the Global Tax Engine.
In most cases, not all the fields in the following master files are discussed in this course. For a full description of
all available fields, refer to the Application Help.

Epicor ERP | 10.0.700.2

Application Setup

Tax Engine Course

Tax Allocation
In the Epicor application, there are three principal tax maintenance programs that work together to properly
allocate taxes and tax rates to invoices: Tax Type Maintenance, Product Tax Category Maintenance, and Tax
Liability Maintenance.
The following image displays the relationship between customers, tax liabilities, tax types, tax rates,
products/charges, and sales invoices.

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Tax Engine Course

Application Setup

Tax Type
Use Tax Type Maintenance to specify different tax types and tax rate codes your company needs to support
sales and purchase processes.
Each tax type is set up with different attributes such as a calculation algorithm, collection method, time of
recognition, tax rates, and other accounting information.
The tax type can have multiple effective rates but only one is the default rate. This rate is used unless a different
rate is specified elsewhere, for example, in a Product Tax Category.
Example Many countries have a standard Value Added Tax (VAT) rate, and a reduced rate for certain
products and services.
Specific products can be exempt from certain tax types. Use product tax categories to divide taxes into groups
that apply to different products. On the Rates > Exempt sheet in this program, select which categories should
not have the current tax calculated against their orders.
Example In some countries, books are exempt from VAT. Therefore, you can create a product tax category
for books, specify the category as exempt in the tax type, and assign the category to the relevant parts in
the Epicor application.
Tax types are assigned to tax liabilities. Each tax type you select identifies individual taxes collected within that
liability.
Each customer record can have a tax liability assigned, which defines the taxes calculated against the orders and
invoices for that customer.
Menu Path
Navigate to this program from the Main Menu:
Financial Management > Accounts Payable > Setup > Tax Type
Financial Management > Accounts Receivable > Setup > Tax Type
Material Management > Purchase Management > Setup > Tax Type
Sales Management > Order Management > Setup > Tax Type
For CRM users, the Main Menu appears as:
Customer Relationship Management > Order Management > Setup > Tax Type

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Application Setup

Tax Engine Course

Collection Method
The Global Tax Engine supports four methods for collecting/charging taxes:
1.

Invoicing

2.

Withholding

3.

Self-Assessment

4.

Self-Assessment, Dual Entry

Select the required method in the Collection Method field on the Detail sheet when you create tax types.
Invoicing
The tax amount is added to the invoice net amount and is collected by the supplier as part of the total invoice
value.
The supplier is responsible for collecting and paying taxes to authorities. The tax amount is usually specified
separately on the invoice.
Example VAT is typically collected using the invoicing method.
The following example illustrates the accounting transactions for a purchase invoice using the Invoicing collection
method:
Account

Debit

Expense

100

AP Tax Accrual

15

Accounts Payable

Credit

115

Withholding
The customer is required to withhold a portion of the amount invoiced and pay this to tax authorities.
These types of taxes are collected and paid by the purchaser on behalf of their supplier's tax liability.
Example Income taxes are usually collected using the Withholding collection method.
The following example illustrates the accounting transactions for a purchase invoice using the Withholding
collection method:
Account

Debit

Expense

100

Credit

AP Tax Accrual

15

Accounts Payable

85

Self-Assessment
The tax payer calculates the tax amount due on relevant transactions, also known as reverse charge.
This can apply on purchases, such as the VAT on intra-EU (European Union) purchases where the purchaser is
liable to determine and report VAT to tax authorities.

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Tax Engine Course

Application Setup

It can also apply in sales, such as income taxes, where a supplier is authorized to retain the income tax due on
settlements they receive from their customer.
The Self-Assessment collection method allows the creation of single tax transactions or dual transactions (input
and output tax), as would be done for EU purchases.
Example If you select the Self-Assessment collection method in a tax type, you must specify a general
ledger (GL) account in the AP Tax Contra or AR Tax Contra account context for the tax GL Control(s)
assigned to the rates within the tax type.
The following example illustrates the accounting transactions for a purchase invoice using the Self-Assessment
collection method:
Account

Debit

Expense

100

AP Tax Accrual

15

Credit

Accounts Payable

100

AP Tax Contra

15

Self-Assessment, Dual Entry


This collection method is the same as the Self-Assessment collection method, with one important difference:
both debit and credit tax entries post to the GL account specified in the AP Tax Accrual or AR Tax Accrual account
context for the GL Control assigned to the rate within the tax type.
Therefore, the AP Tax Contra and AR Tax Contra account contexts are not used.

Tax Timing
There are three options used to determine the time when tax transactions are created:
1.

Invoice

2.

Fully Paid

3.

Partial Payment

Select the required timing in the Tax Timing field on the Detail sheet when you create tax types.
Invoice
Tax is recognized and accounted for when the invoice is created.
Fully Paid
Tax is deferred when the invoice is posted, and accounted for on interim accounts. When the invoice is fully paid,
the tax is recognized and tax transactions for reporting are created. The amount booked on the interim accounts
is reversed, and the tax amount is booked on the input/output tax accounts.
Partial Payment
When a partial payment is posted, a proportionate tax amount is recognized. When the final payment is made,
the remaining tax is recognized.

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Application Setup

Tax Engine Course

Payment Discount Treatment


Use the Payment Discount Treatment field to define how to calculate a tax when a payment discount is given.
Note These discount treatment options are only available if the tax type is set to the Invoicing collection
method. Otherwise, the Epicor application defaults to the Discount Does Not Affect Tax treatment option.
The following Payment Discount Treatments are available.
Discount Does Not Affect Tax
When a discount is applied, it does not change the tax amount charged.
Note This is the default option.
Payment Discount Reduces Tax
Tax is adjusted when the payment discount is taken against the amount.
Term Discount Reduces Tax
The tax and tax base are adjusted when the invoice is created and the calculation assumes the full payment
discount is taken according to the payment terms.
Payment Discount Before Tax
The payment discount is calculated on the invoice total before tax.
An example of the behavior of the four different discount treatments is given below.
Note The following examples are based on an AR invoice with the following details:
Invoice Line Extended Price: 100.00
Tax %: 10.00
Terms Discount %: 2.00

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Discount Does
Not Affect Tax

Payment Discount Term Discount


Reduces Tax
Reduces Tax

Payment Discount
Before Tax

Invoice Ext. Price

100.00

100.00

100.00

100.00

Tax Amount

10.00

10.00

9.80

10.00

Invoice Total

110.00

110.00

109.80

110.00

Cash Receipt Full Payment


Amount

107.80

107.80

107.80

108.00

Cash Receipt Discount


Calculation

2.20

2.20

2.00

2.00

Tax Adjustment from Cash


Receipt

0.00

-0.20

0.00

0.00

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Tax Engine Course

Application Setup

Product Tax Category


Use Product Tax Category Maintenance to classify different products and services based on taxes. In case a
group of products uses a specific rate and not the default rate selected for the tax type, this rate can be assigned
to the product tax category.
Note If a product tax category is defined as the default, then tax calculations performed on invoice lines
without a product category will use the default category to identify relevant taxes and rates.
Menu Path
Navigate to this program from the Main Menu:
Financial Management > Accounts Payable > Setup > Tax Product Category
Financial Management > Accounts Receivable > Setup > Tax Product Category
Material Management > Purchase Management > Setup > Product Tax Category
Sales Management > Order Management > Setup > Product Tax Category
For CRM users, the Main Menu appears as:
Customer Relationship Management > Order Management > Setup > Product Tax Category

Tax Liability
Use Tax Liability Maintenance to enter tax liability records. A tax liability represents taxes a company handles
when they trade with customers and suppliers. This can be taxes liable due to both your company's tax status or
the tax status of the customer or supplier.
The Epicor application allows you to assign a list of tax types to each tax liability code. The tax type can contain
rules that control which level to calculate the tax (line or total) and can apply an exemption available for the tax.
You can define which location controls the liability. Use Customer Maintenance or Supplier Maintenance to
attach a tax liability code to a customer or supplier. You can also specify a different tax liability in the customer
or supplier Bill To Address and Ship To Address.
Example In some countries, taxes are determined by the place of delivery of goods, not the legal address
of the customer. In this case, a tax liability must be assigned to the customer's Ship To Address.
The combination of tax liability and product tax category, which represents what has been sold or purchased,
determines the final transaction taxes and rates.
Although tax liability is optional in the Epicor application, if it is used, all records in Customer Maintenance and
Supplier Maintenance can be associated with a particular liability.
Example In some countries, there is a marketing tax applied to certain products, while VAT is charged on
all products. In this case, you can set up a tax liability which includes both the VAT and marketing tax types.
You can then set up two product tax categories - one that applies only the VAT tax type and another that
applies both VAT and marketing tax types. You then assign a product tax category to parts accordingly.
Menu Path
Navigate to this program from the Main Menu:
Financial Management > Accounts Payable > Setup > Tax Liability
Financial Management > Accounts Receivable > Setup > Tax Liability
Material Management > Purchase Management > Setup > Tax Liability

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Application Setup

Tax Engine Course

Sales Management > Order Management > Setup > Tax Liability
For CRM users, the Main Menu appears as:
Customer Relationship Management > Order Management > Setup > Tax Liability

Tax Exemptions
Exemptions can be defined on different levels and entities such as tax types, tax liabilities, customers, suppliers,
and parts.
Depending on where you enter exemptions, there are four exemption types available:
1.

Reduced Base (default) - The taxable base amount is reduced by the percentage specified.

2.

Reduced Rate - The tax rate derived for the tax type is reduced by the percentage specified.

3.

Fixed Rate - The percentage specified is used as the tax rate, overriding the percentage for the tax type
and rate code.

4.

Fully Exempt - The exempt percentage is always 100%.

Custom Tax Algorithms


Use Custom Tax Algorithms to define the base value to use for tax calculations and the actual algorithm. The
standard tax algorithm multiplies the net amount, after discount amounts are subtracted, by the applicable tax
rate. Leverage this program to handle different calculations, such as when one tax is based on the net value plus
another tax, also called piggyback taxes. You can later link custom algorithms with tax types.
Create algorithms in Custom Tax Algorithm Maintenance using a sequence of lines which use Operands and
Operators to define which amounts and tax types to use to produce a base amount to be taxed according to the
tax liability and product tax category.
Menu Path
Navigate to this program from the Main Menu:
Financial Management > Accounts Payable > Setup > Custom Tax Algorithm
Financial Management > Accounts Receivable > Setup > Custom Tax Algorithm
Material Management > Purchase Management > Setup > Custom Tax Algorithm
Sales Management > Order Management > Setup > Custom Tax Algorithm
For CRM users, the Main Menu appears as:
Customer Relationship Management > Order Management > Setup > Custom Tax Algorithm
The operators and operands available for each column in Custom Tax Algorithm Maintenance are as follows:
Operand 1
The first operand in the operation.
The following values are available:

16

Operand

Name

Notes

NV

Net Value

Price after discount excluding taxes

GV

Gross Value

All calculated taxes are included

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Tax Engine Course

Application Setup

Operand

Name

Notes

SV

Sales Value

Before discount, excluding taxes

TA

Tax Amount before Exemptions

Tax type is defined in Operand 3

TE

Tax Amount after Exemptions

Tax type is defined in Operand 3

Lxx

Line

Result of expression in Line xx

PT

Payment Total

Payment total amount

PI

Payment Proportional Amount

The paid amount is proportionally split to the underlying


invoice lines. The tax is calculated based on those tax
categories

Numeric Constant

Number specified by user

Operator
The Operator used when calculating the line.
The following values are available:
Operator

Description

Add Operand 1 and Operand 2

Multiply Operand 1 with Operand 2

Divide Operand 1 by Operand 2

Subtract Operand 2 from Operand 1

Calculate Operand 2 % of Operand 1

>

Logical expression: If Operand 1 is greater than Operand 2, the line value is defined by Operand
3, else by Operand 4
Note Disabled if Operand 1 or 2 is TA or TE

<

Logical expression: if Operand 1 is less than Operand 2, the line value is defined by Operand
3, else by Operand 4
Note Disabled if Operand 1 or 2 is TA or TE

The expression result is equal to Operand 1

TR

Calculate tax rate as defined by tax liability and product tax category

Operand 2
The second operand in the operation.
The values available are the same as those available for Operand 1.
Operand 3
The third operand in the operation. Its value depends on the values of Operand 1 and the Operator.
As long as the Operand 1 value is not TE or TA, and the Operator value is > or <, you can enter a valid Operand
here using the values described for Operand 2.
Operand 3 Tax

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Application Setup

Tax Engine Course

You can select an applicable Tax Rate code if Operand 1 is TE or TA.


Operand 4
If operator > or < has been used, enter a valid operand here using the values described for Operand 2.
Operand 4 Tax
Select an applicable Tax Rate code, if Operand 2 is TA or TE.
A custom tax algorithm example is covered in Scenario 2: Apply a Custom Tax Algorithm in this course.

Legal Text
Use Legal Text Maintenance to create default text that explains the taxes that display on external documents.
The text that displays on a specific document is defined through the tax type used to calculate the tax.
Example In some countries, invoices which include tax-exempt items must quote the applicable tax law
and its description.
Menu Path
Navigate to this program from the Main Menu:
Financial Management > Accounts Payable > Setup > Legal Text
Financial Management > Accounts Receivable > Setup > Legal Text
Material Management > Purchase Management > Setup > Legal Text
Sales Management > Order Management > Setup > Legal Text
For CRM users, the Main Menu appears as:
Customer Relationship Management > Order Management > Setup > Legal Text

Cents Override
Use Cents Override Maintenance to define the tax required on the decimal portion of an amount. These
definitions use the number of decimals defined for the base currency of the company. Cents overrides apply to
the effective rates defined in Tax Type Maintenance.
Menu Path
Navigate to this program from the Main Menu:
Financial Management > Accounts Payable > Setup > Cents Override
Financial Management > Accounts Receivable > Setup > Cents Override
Material Management > Purchase Management > Setup > Cents Override
Sales Management > Order Management > Setup > Cents Override
For CRM users, the Main Menu appears as:
Customer Relationship Management > Order Management > Setup > Cents Override

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Tax Engine Course

Application Setup

Tax Report Category


Use Tax Report Category Maintenance to define categories associated with tax types for use as a parameter
on certain tax reports.
Specify a tax report category in the Report Category field in Tax Type Maintenance. When you run the Tax
Report, you can select the tax report category on the Filter > Report Category sheet.
Menu Path
Navigate to this program from the Main Menu:
Financial Management > Accounts Payable > Setup > Tax Report Category
Financial Management > Accounts Receivable > Setup > Tax Report Category
Material Management > Purchase Management > Setup > Tax Report Category
Sales Management > Order Management > Setup > Tax Report Category
For CRM users, the Main Menu appears as:
Customer Relationship Management > Order Management > Setup > Tax Report Category

Tax Jurisdiction
Use Tax Jurisdiction Maintenance to enter special tax codes that define jurisdictions (authorities) in which you
report taxes.
Tax jurisdictions are the governance or authority that grants the power to tax a particular tax type. Associate
each jurisdiction you define with at least one tax type in Tax Type Maintenance.
Tax jurisdiction examples include:
Counties
Districts
Cities
Menu Path
Navigate to this program from the Main Menu:
Financial Management > Accounts Payable > Setup > Tax Jurisdiction
Financial Management > Accounts Receivable > Setup > Tax Jurisdiction
Material Management > Purchase Management > Setup > Tax Jurisdiction
Sales Management > Order Management > Setup > Tax Jurisdiction
For CRM users, the Main Menu appears as:
Customer Relationship Management > Order Management > Setup > Tax Jurisdiction

Tax Authority
Use Tax Authority Maintenance to add, edit, and delete the codes that define taxes for external companies.
This program is available if your company links to an external financial system.
Tax Authority Maintenance is a component of the taxation matrix within the Epicor application. Use this program
to organize data during Accounts Receivable (AR) invoice entry for tax reporting purposes.

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Application Setup

Tax Engine Course

Use Customer Maintenance or Supplier Maintenance to assign tax authority codes to a customer or supplier
record.
Menu Path
Navigate to this program from the Main Menu:
Financial Management > Accounts Payable > Setup > Tax Authority
Financial Management > Accounts Receivable > Setup > Tax Authority
Material Management > Purchase Management > Setup > Tax Authority
Sales Management > Order Management > Setup > Tax Authority
For CRM users, the Main Menu appears as:
Customer Relationship Management > Order Management > Setup > Tax Authority

Tax Entries
The main programs where tax entries are created are AP Invoice Entry and AR Invoice Entry. The AP Payment
Entry and Cash Receipts Entry programs also manage tax entries, for example, when taxes are deferred until
settlement.

Invoice Entry
Use the AP Invoice Entry program to record payables invoices from your suppliers. The invoices you enter here
update open purchase orders, shipping receipts, and General Ledger accounts. Use AR Invoice Entry to bill your
customers. You can create invoices, such as miscellaneous invoices, that link to sales orders and create other
items, such as credit memos, which do not link to these sales records. Use the Header > Tax sheet in AP Invoice
Entry and AR Invoice Entry to review and edit tax calculations for invoices.
The tax liability, tax type(s), and rate code used for each invoice line are taken from the supplier's or customer's
tax liability and, if applicable, the part's product tax category.
Important Tax categories are not tied to tax liabilities. If a supplier or customer is not assigned a tax
liability, taxes are not added to the invoice. Although a tax category may display on the invoice line(s), taxes
are not charged because a tax liability is not assigned to the customer.
You can manually add tax liabilities and tax categories to invoice lines at the time of invoice entry.
Note The following fields on the Header > Tax sheet are of particular note for tax entries:
Tax Point
An optional field which allows you to set the tax point date. This specifies the date when the tax is to be reported.
Tax Rate Date
An optional field which allows you to specify the date which is used to retrieve the effective tax rate. If no tax
rate date is specified, the tax engine uses the date specified in the tax point, if specified, or the invoice apply
date.
Example Currently, the effective rate for Standard VAT is 17.5%. This changes to 20% on July 1st, so a
new effective rate is entered for the Standard VAT tax type, effective from July 1st.
Therefore, selecting a tax rate date before July 1st uses the 17.5% rate, whereas selecting a tax rate date
from July 1st onwards uses the 20% rate.

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Scenario 1: Implement a Self-Assessment Purchase Tax

Scenario 1: Implement a Self-Assessment Purchase Tax


In this scenario, implement the purchase tax setup for a company based in the European Union (EU).
The following are some of the taxation requirements for the country in question:
There are two VAT rates used for both sales and purchasing: 23% and 5%.
For statutory tax reporting purposes, separate tax codes are required for the purchase of fixed assets.
This tax setup is illustrated in the following table:
Tax Type

Tax Rate

Applicable To

VAT on Fixed Assets

23%

Fixed assets taxable at 23% VAT

VAT on Fixed Assets

5%

Fixed assets taxable at 5% VAT

VAT on Other Items

23%

Other items taxable at 23% VAT

VAT on Other Items

5%

Other items taxable at 5% VAT

Implementation Steps
In order to implement this tax setup for purchases, the following is required:
Separate tax types for VAT on fixed assets and for VAT on other items.
Separate tax types for VAT on fixed assets in invoices received in the month after the invoice date and for
VAT on other items in invoices received in the month after the invoice date.
The Self-Assessment collection method for domestic purchases.
Separate tax liabilities to apply to fixed asset suppliers or other suppliers.
Note You can alternatively use one tax liability which includes all the tax types and use product tax
categories to determine whether a fixed asset tax type or other tax type is used in an invoice line. This
type of solution is covered in Scenario 3: Set Multiple Rates and Exemptions.

Workshop - Create a Standard Tax Type


In this workshop, create one of the tax types required for the tax setup, assign a GL Control to the tax rate, and
enter an account in the Tax Contra account context of the GL Control to support the Self Assessment tax collection
method.
Navigate to Tax Type Maintenance.
Menu Path: Financial Management > Accounts Payable > Setup > Tax Type

Create a VAT Tax Type


1. From the New menu, select New Tax Type Code.
2. In the Tax ID field, enter XXX-EU (where XXX are your initials).

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3. In the Description field, enter XXX EU VAT (where XXX are your initials).
4. In the Collection Method field, select Self-Assessment.
5. Click Save.

Create a Rate Code


1. From the New menu, select New Rate.
The Rates > Detail sheet displays.
2. In the Rate Code field, enter StdVAT.
3. In the Description field, enter Std VAT Rate.
4. Select the Default Rate check box.
5. Click Save.

Create an Effective Rate


1. From the New menu, select New Effective Rate.
The Rates > Effective Rate > Detail sheet displays.
2. In the Effective From field, verify today's date displays.
3. In the Rate Type field, verify Percentage displays.
4. In the Percentage field, enter 23.
5. In the Currency field, select Euro.
6. In the Compare At pane, select the Line Level option.
7. Click Save.

Assign and Edit a GL Control


1. From the New menu, select New GL Control.
The Rates > GL Control > Detail sheet displays.
2. In the Type field, enter Tax and press Tab.
3. In the Control field, search for and select VAT-RATE08.
4. Click Save.
5. In the Control field, right-click and select Open With... > GL Control Code Entry.
The GL Control Maintenance window displays.

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Scenario 1: Implement a Self-Assessment Purchase Tax

6. In the tree menu, select Account Context > Main Book.


The Account > Detail sheet displays.
7. Navigate to the Account > List sheet.
8. In the GL Account field for the AP Tax Contra and AR Tax Contra account contexts, enter 9910-00-00
9. Click Save.
10. Exit GL Control Maintenance.
11. To the message Return to the GL Control?, click No.

Create a Reduced VAT Rate


Repeat the steps in the Create a Rate Code and Create an Effective Rate workshop tasks to create another rate
code and effective rate in the XXX-EU tax type. Use the following information:
1. To enter a rate code, enter or select the following information:
Field

Data

Rate Code

LowVAT

Description

Reduced VAT Rate

Default Rate

Clear

2. Click Save.
3. To create an effective rate, enter or select the following information:
Field

Data

Effective From

Today's date

Rate Type

Percentage

Percentage

Currency

EUR

Compare At

Line Level

4. Click Save.

Assign a GL Control
1. From the New menu, select New GL Control.
The Rates > GL Control > Detail sheet displays.
2. In the Type field, enter Tax and press Tab.
3. In the Control field, search for and select VAT-RATE08.

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4. Click Save.
5. Remain in Tax Type Maintenance for the next workshop.

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Scenario 1: Implement a Self-Assessment Purchase Tax

Workshop - Create a Fixed Asset Tax Type


In this workshop, create a second tax type, specifically for fixed asset purchases.

Create a Tax Type


1. From the New menu, select New Tax Type Code.
2. In the Tax ID field, enter XXX-FA (where XXX are your initials).
3. In the Description field, enter XXX FA VAT (where XXX are your initials).
4. In the Collection Method field, select Self-Assessment.
5. Click Save.

Create a Rate Code


1. From the New menu, select New Rate.
The Rates > Detail sheet displays.
2. In the Rate Code field, enter StdFA-VAT.
3. In the Description field, enter Std Fixed Asset VAT Rate.
4. Select the Default Rate check box.
5. Click Save.

Create an Effective Rate


1. From the New menu, select New Effective Rate.
The Rates > Effective Rate > Detail sheet displays.
2. In the Effective From field, verify today's date displays.
3. In the Rate Type field, verify Percentage displays.
4. In the Percentage field, enter 23.
5. In the Currency field, select Euro.
6. In the Compare At pane, select the Line Level option.
7. Click Save.

Assign a GL Control
1. From the New menu, select New GL Control.
The Rates > GL Control > Detail sheet displays.

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2. In the Type field, enter Tax and press Tab.


3. In the Control field, search for and select VAT-RATE08.
4. Click Save.

Create Reduced VAT Rate


Repeat the steps in the Create a Rate Code and Create an Effective Rate workshop tasks to create an additional
rate code and an additional effective rate for the XXX-FA tax type.
1. To create a rate code, enter or select the following information:
Field

Data

Rate Code

LowFAVAT

Description

Reduced Fixed Asset VAT Rate

Default Rate

Clear

2. Click Save.
3. To create an effective rate, enter or select the following information:
Field

Data

Effective From

Today's date

Rate Type

Percentage

Percentage

Currency

EUR

Compare At

Line Level

4. Click Save.
5. Exit Tax Type Maintenance.

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Scenario 1: Implement a Self-Assessment Purchase Tax

Workshop - Set Up Tax Liabilities


In this workshop, create separate tax liabilities for fixed assets and other items and then assign them to suppliers.
Navigate to Tax Liability Maintenance.
Menu Path: Financial Management > Accounts Payable > Setup > Tax Liability

Create a Tax Liability


1. From the New menu, select New Liability.
2. In the Tax Liability field, enter X-EU (where X is your first initial).
3. In the Description field, enter XXX EU (where XXX are your initials).
4. Select the Inside EU check box.
5. Clear the Use in AR check box.
Note This is because you only want this tax liability to be available in Accounts Payable.

6. Click Save.

Assign a Tax Type to a Liability


1. From the New menu, select New Tax Type.
The Taxes > List sheet displays.
2. In the Tax ID field, select XXX EU VAT (where XXX are your initials).
3. In the Tax Method field, verify Line Level displays.
4. In the Exemption field, verify No Exempt displays.
5. Click Save.

Create a Fixed Asset Tax Liability


1. From the New menu, select New Liability.
2. Navigate to the Detail sheet.
3. In the Tax Liability field, enter X-FA (where X is your first initial).
4. In the Description field, enter XXX FA (where XXX are your initials).
5. Select the Inside EU check box.
6. Clear the Use in AR check box.

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7. Click Save.

Assign a Fixed Asset Tax Type to a Liability


1. From the New menu, select New Tax Type.
The Taxes > Detail sheet displays.
2. In the Tax Type field, select XXX FA VAT (where XXX are your initials).
3. In the Tax Method field, verify Line Level displays.
4. In the Exemption field, verify No Exempt displays.
5. Click Save.
6. Exit Tax Liability Maintenance.

Assign a Tax Liability to Suppliers


Navigate to Supplier Maintenance.
Menu Path: Financial Management > Accounts Payable > Setup > Supplier
1. In the Supplier field, search for and select German Tires Manufacturer.
2. In the Tax Liability field, search for and select X-EU (where X is your first initial) created in the Workshop
- Set Up Tax Liabilities.
3. Click Save.
4. In the Supplier field, search for and select supplier German Car Manufacturer.
5. In the Tax Liability field, search for and select the fixed asset tax liability X-FA (where X is your first initial)
created in the Workshop - Set Up Tax Liabilities.
6. Click Save.
7. Exit Supplier Maintenance.

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Scenario 1: Implement a Self-Assessment Purchase Tax

Workshop - Enter AP Invoices


In this workshop, create two purchase invoices for different suppliers and manually adjust the tax on an invoice.
Navigate to AP Invoice Entry.
Menu Path: Financial Management > Accounts Payable > General Operations > Invoice Entry

Create an Invoice Header


1. From the New menu, select New Group.
2. In the Group field, enter XXX (where XXX are your initials).
3. From the New menu, select New Invoice.
The Header > Detail sheet displays.
4. In the Supplier field, search for and select German Car Manufacturer.
5. In the Invoice field, enter XXX-1 (where XXX are your initials).
6. In the Invoice Date field, enter today's date.
7. In the Description field, enter New FA.
8. In the Amount field, enter 10,000.
9. In the Terms field, select Net 30.
10. Verify the Ready To Calculate check box is selected.
11. Click Save.

Create an Invoice Line


1. From the New menu, select New Misc Line.
The Lines > Detail sheet displays.
2. In the Ext Amount field, enter 10,000.
3. Click Save.
4. Navigate to the Header > Tax sheet.
5. In the Self-assessed Tax field, verify the tax is calculated according to the tax liability XXX-FA (where XXX
are your initials) assigned to the supplier.
Note 10,000 * 0.23 = 2,300

6. Navigate to the Header > Detail sheet.


7. In the Variance field, verify 0.00 displays.

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Create a Second Invoice


1. From the New menu, select New Invoice.
2. In the Supplier field, search for and select German Tire Manufacturer.
3. In the invoice number field, enter XXX-2 (where XXX are your initials).
4. In the Invoice Date field, enter today's date.
5. In the Description field, enter New supplies.
6. In the Amount field, enter 100.
7. In the Terms field, select Net 30.
8. Verify the Ready To Calculate check box is selected.
9. Click Save.

Create the Invoice Line


1. From the New menu, select New Misc Line.
The Lines > Detail sheet displays.
2. In the Description field, enter New Supplies.
3. In the Ext Amount field, enter 100.
4. Click Save.
5. Navigate to the Header > Tax sheet.
6. Verify the tax is calculated according to the tax liability XXX EU VAT assigned to the supplier (where XXX
are your initials).
7. In the Invoice Taxes pane, select the only tax line.
8. Click Delete.
9. In the Delete Confirmation window, click Yes.
10. From the New menu, select New Header Tax Code.
In the Invoice Taxes pane, a new line displays.
11. In the Tax Type field, select XXX EU VAT (where XXX are your initials).
12. In the Rate Code field, select Reduced VAT.
13. Click Save.
14. Click Refresh.

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The tax is recalculated at the reduced VAT rate of 5%.

Post Invoices
1. From the Actions menu, select Group > Post.
The AP Invoice Post Process window displays.
2. Click Submit.
3. Close the AP Invoice Post Process window.
4. Exit AP Invoice Entry.

Workshop - Review the AP Invoice Tracker


In this workshop, review the tax transactions created by posting the two invoices.
Navigate to the AP Invoice Tracker.
Menu Path: Financial Management > Accounts Payable > General Operations > Invoice Tracker

Review Tax Transactions


1. In the Invoice field, enter XXX-1 (where XXX are your initials).
2. Navigate to the Header > GL Transactions sheet.
3. Click Retrieve.
4. Review the transaction lines that display.
Note There are two tax lines because the tax collection type is Self-Assessment.

5. Repeat steps 1 - 4 for invoice XXX-2 (where XXX are your initials).
6. Exit the AP Invoice Tracker.

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Scenario 2: Apply a Custom Tax Algorithm

Tax Engine Course

Scenario 2: Apply a Custom Tax Algorithm


In this scenario, implement a tax setup that uses a Custom Tax Algorithm to calculate a luxury tax applied to the
taxable amount plus VAT.
This is an example of so-called piggyback taxes, which are used in some countries.
The taxation requirements are as follows:
A VAT rate of 23%
A 4% luxury tax which is applied to the base amount plus VAT
This setup is illustrated in the following table:
Tax Type

Tax Rate

Applicable To

VAT

23%

Amount taxable at 23% VAT

Luxury Tax

4%

Taxable amount + VAT amount

Example An invoice with a base amount of 100 EUR is calculated as follows:


Taxable amount = 100
VAT at 23% on taxable amount = 23
Base amount = taxable amount + VAT = 123
Luxury tax @ 4% on base amount = 4.92
Invoice total = base amount + luxury tax = 127.92 EUR

Implementation Steps
In order to implement this tax setup, the following is required:
A tax type for VAT, with Invoicing collection method.
Note For the purposes of this scenario, you will use the VAT tax type and rate you created in Scenario
1: Implement a Self-Assessment Purchase Tax.
A tax type for Luxury Tax, with Invoicing collection method.
A tax liability that features both tax types, with Line Level tax method.
A custom tax algorithm assigned to the Luxury Tax type.
A tax liability assigned to relevant customer(s) and supplier(s).

Workshop - Adjust the VAT Tax Type


In this workshop, use the VAT tax type created in Scenario 1 and change the collection method to Invoicing.
Navigate to Tax Type Maintenance.
Menu Path: Financial Management > Accounts Payable > Setup > Tax Type

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Scenario 2: Apply a Custom Tax Algorithm

1. In the Tax ID field, enter XXX-EU (where XXX are your initials).
2. In the Collection Method field, select Invoicing.
3. Click Save.
4. Minimize Tax Type Maintenance.

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Scenario 2: Apply a Custom Tax Algorithm

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Workshop - Create a Custom Tax Algorithm


In this workshop, create a custom tax algorithm to calculate a luxury tax applied to the taxable amount plus VAT.
Navigate to Custom Tax Algorithm Maintenance.
Menu Path: Financial Management > Accounts Payable > Setup > Custom Tax Algorithm

Create a Custom Algorithm ID


1. From the New menu, select New Algorithm.
2. In the Algorithm field, enter XXX-VATLUX (where XXX are your initials).
3. In the Description field, enter XXX VAT & Luxury (where XXX are your initials).
4. Click Save.

Create Algorithm Lines


1. From the New menu, select New Line.
The Line > Detail sheet displays.
2. Navigate to the Line > List sheet.
3. In the Operand 1 field, select TE.
TE represents the tax amount after exemptions.
4. In the Operator field, select + (plus sign).
5. In the Operand 2 field, select NV.
NV represents the net value; the price after discount, excluding taxes.
6. In the Operand 3 Tax field, select the VAT tax type XXX EU VAT you updated in the previous workshop
(where XXX are your initials).
7. In line 1, verify the Base Line check box is selected.
Note This indicates the result from this line will be used as the base amount.

8. Click Save.
9. From the New menu, select New Line.
In the Line > List sheet, a new line displays.
10. In the Operand 1 field, enter L1.
L1 represents the result of the expression in line 1.
11. In the Operator field, select TR.
This operator calculates the tax rate as defined by tax liability and product tax category

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12. In line 2, select the Tax Line check box.


Note This indicates that the result from this line will be used as the tax amount.

13. Click Save.


14. Exit Custom Tax Algorithm Maintenance.

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Workshop - Create the Luxury Tax Type


In this workshop, create the luxury tax type required for the tax setup.
Maximize Tax Type Maintenance.

Create the Tax Type


1. From the New menu, select New Tax Type Code.
2. In the Tax ID field, enter XXX-LUX (where XXX are your initials).
3. In the Description field, enter XXX Luxury Tax (where XXX are your initials).
4. In the Collection Method field, select Invoicing.
5. In the Custom Algorithm field, select the XXX VAT & Luxury algorithm created in the previous workshop
(where XXX are your initials).
6. Click Save.

Create a Rate Code


1. From the New menu, select New Rate.
The Rates > Detail sheet displays.
2. In the Rate Code field, enter StdLUX.
3. In the Description field, enter Std Luxury Rate.
4. Select the Default Rate check box.
5. Click Save.

Create an Effective Rate


1. From the New menu, select New Effective Rate.
The Rates > Effective Rate > Detail sheet displays.
2. In the Effective From field, verify today's date displays.
3. In the Rate Type field, verify Percentage displays.
4. In the Percentage field, enter 4.
5. In the Currency field, select Euro.
6. In the Compare At pane, select the Line Level option.
7. Click Save.

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Scenario 2: Apply a Custom Tax Algorithm

Assign a GL Control
1. From the New menu, select New GL Control.
The Rates > GL Control > Detail sheet displays.
2. In the Type field, enter Tax and press Tab.
3. In the Control field, search for and select VAT-RATE08.
4. Click Save.
5. Exit Tax Type Maintenance.

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Workshop - Set Up a Tax Liability


In this workshop, create a tax liability to include the VAT tax type created in Scenario 1 and the luxury tax type
created in the Workshop - Create Luxury Tax Type.
Navigate to Tax Liability Maintenance.
Menu Path: Financial Management > Accounts Payable > Setup > Tax Liability

Create a Tax Liability


1. From the New menu, select New Liability.
2. In the Tax Liability field, enter LUX.
3. In the Description field, enter XXX VAT & Lux (where XXX are your initials).
4. Verify the Use in AR and Use in AP check boxes are selected.
5. Click Save.

Assign Tax Types to a Liability


1. From the New menu, select New Tax Type.
The Taxes > List sheet displays.
2. In the Tax Type field, select XXX EU VAT (where XXX are your initials).
3. In the Tax Method field, verify Line Level displays.
4. Click Save.
5. Repeat steps 1 - 4 to add the XXX Luxury Tax tax type created in the Workshop - Create the Luxury Tax
Type.
6. Exit Tax Liability Maintenance.

Assign a Tax Liability to a Customer


Navigate to Customer Maintenance.
Menu Path: Financial Management > Accounts Receivable > Setup > Customer
1. In the Customer field, search for and select Berlin Medical.
2. Navigate to the Billing > Detail sheet.
3. In the Tax Liability field, enter the tax liability LUX, created in the Workshop - Set Up a Tax Liability.
4. Click Save.
5. Exit Customer Maintenance.

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Scenario 2: Apply a Custom Tax Algorithm

Workshop - Enter an AR Invoice


In this workshop, enter a miscellaneous invoice that uses the custom tax algorithm to calculate a tax amount.
Navigate to AR Invoice Entry.
Menu Path: Financial Management > Accounts Receivable > General Operations > Invoice Entry

Create an Invoice Header


1. From the New menu, select New Group.
2. In the Group field, enter XXX (where XXX are your initials).
3. Click Save.
4. From the New menu, select New Miscellaneous Invoice.
The Header > Detail sheet displays.
5. In the Sold To Customer field, search for and select Berlin Medical Equipment.
6. Click Save.

Create an Invoice Line


1. From the New menu, select New Line.
The Line > Detail sheet displays.
2. In the Part/Rev... field, enter XXX-Luxuries (where XXX are your initials).
3. In the Quantity field, enter 5.
4. In the Unit Price field, enter 20.
5. Click Save.

Review the Tax and Post the Invoice


1. Navigate to the Line > Tax > List sheet.
Two tax lines display - one with Tax Amount 23.00 and one with Tax Amount 4.92.
2. Navigate to the Header > Detail sheet.
The invoice total amount is 127.92.
3. From the Actions menu, select Group > Post.
The AR Invoice Post Process window displays.
4. Click Submit.
5. Close the AR Invoice Post Process window.

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6. Exit AR Invoice Entry.

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Scenario 3: Set Multiple Rates, Exemptions, and Tax Categories

Scenario 3: Set Multiple Rates, Exemptions, and Tax


Categories
In this scenario, implement the sales tax setup for a company based in a South American country.
The sales tax requirements for the country in question are the following:
Three VAT rates used for sales: 21%, 10.5%, and 0% (exempt).
A minimum VAT amount which must be charged on sales invoices which feature VAT at 21%.
Three VAT Perception rates used for sales: 3%, 1.5%, and 0% (exempt). The 3% rate applies to items taxable
at the 21% VAT rate, the 1.5% rate applies to items taxable at the 10.5% VAT rate, and the 0% rate to items
exempt from VAT.
A city tax rate of 3.5%, which applies to items taxable at both the 21% and 10.5% VAT rates.
An additional local tax of 1.5%, which also applies to items taxable at both the 21% and 10.5% VAT rates.
This tax setup is illustrated in the following table:
Tax Type

Tax Rate

Applicable To

VAT

21%

Amount taxable at 21% VAT

VAT

10.5%

Amount taxable at 10.5% VAT

VAT

0% (exempt)

Amounts exempt from VAT

VAT Perception

3%

Amount taxable at 21% VAT

VAT Perception

1.5%

Amount taxable at 10.5% VAT

VAT Perception

0% (exempt)

Amounts exempt from VAT

City Tax

3.5%

Amounts taxable at 21% and 10.5% VAT

Local Tax

1.5%

Amounts taxable at 21% and 10.5% VAT

Implementation Steps
In order to implement this tax setup, the following is required:
Separate tax types for VAT, VAT Perception, City Tax, and Local Tax.
Multiple tax rates for the VAT and VAT Perception tax types.
A tax liability that features all four tax types listed above.
Tax exemptions.
Product tax categories to enable automatic application of reduced VAT and VAT Perception rates to selected
items.

Workshop - Create Tax Types


In this workshop, create the various tax types required for the tax setup.
Navigate to Tax Type Maintenance.

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Tax Engine Course

Menu Path: Financial Management > Accounts Payable > Setup > Tax Type

Create a VAT Tax Type


1. From the New menu, select New Tax Type Code.
2. In the Tax ID field, enter XXX-VAT (where XXX are your initials).
3. In the Description field, enter XXX VAT (where XXX are your initials).
4. In the Collection Method field, verify Invoicing is selected.
5. Click Save.

Create a Rate Code


1. From the New menu, select New Rate.
The Rates > Detail sheet displays.
2. In the Rate Code field, enter MainVAT.
3. In the Description field, enter Main VAT Rate.
4. Select the Default Rate check box.
5. Click Save.

Create an Effective Rate


1. From the New menu, select New Effective Rate.
The Rates > Effective Rate > Detail sheet displays.
2. In the Effective From field, verify today's date displays.
3. In the Rate Type field, verify Percentage displays.
4. In the Percentage field, enter 21.
5. In the Minimum Tax Amount field, enter 5.
6. In the Compare At pane, select the Line Level option.
7. Click Save.

Select a GL Control
1. From the New menu, select New GL Control.
The Rates > GL Control > Detail sheet displays.
2. In the Type field, search for and select Tax and press Tab.

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3. In the Control field, search for and select VAT-RATE08.


4. Click Save.

Create a Reduced VAT Rate


1. Repeat the steps in the Create Rate Code workshop task to create an additional rate code for the tax type
XXX-VAT using the following information:
Field

Data

Rate Code

RedVAT

Description

Reduced Rate VAT

Default Rate

Clear

2. Click Save.
3. Repeat the steps in the Create Effective Rate workshop task to create a new effective rate using the following
information:
Field

Data

Effective From

Today's date

Rate Type

Percentage

Percentage

10.5

Currency

United States Dollar

Compare At

Line Level

4. Click Save.
5. Repeat the steps in the Select GL Control workshop task to select the GL control code for the reduced VAT
rate.

Create a Perception Tax Type


1. Repeat the steps in the Create a VAT Tax Type workshop task to create a Perception Tax type using the
following information:
Note Replace XXX with your initials.
Important Click Save after each step.

Field

Data

Tax ID

XXX-PER

Description

XXX Perception

Collection Method

Invoicing

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2. Repeat the steps in the Create a Rate Code and Select a GL Control workshop tasks to add a rate code and
GL control to the XXX-Per rate type using the following information:
Field

Data

Rate Code

MainPer

Description

Main Perception Rate

Default Rate

Selected

GL Control Type

Tax

GL Control Code

VAT-RATE08

3. Repeat the steps in the Create an Effective Rate workshop task to add an effective rate to the MainPer rate
code using the following information:
Field

Data

Effective From

Today's date

Rate Type

Percentage

Percentage

Currency

United States Dollar

Compare At

Line Level

4. Repeat the steps in the Create a Rate Code and Select a GL Control workshop tasks to add another rate
code and GL control to the XXX-Per tax type using the following information:
Field

Data

Rate Code

RedPer

Description

Reduced Perception Rate

Default Rate

Clear

GL Control Type

Tax

GL Control Code

VAT-RATE08

5. Repeat the steps in the Create an Effective Rate workshop task to add an effective rate to the RedPer rate
code using the following information:

44

Field

Data

Effective From

Today's date

Rate Type

Percentage

Percentage

1.5

Currency

United States Dollar

Compare At

Line Level

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Scenario 3: Set Multiple Rates, Exemptions, and Tax Categories

Create a City Tax Type


1. Repeat the steps in the Create a VAT Tax Type workshop task to create a City Tax type using the following
information:
Note Replace XXX with your initials.
Important Click Save after each step.

Field

Data

Tax ID

XXX-City

Description

XXX City Tax

Collection Method

Invoicing

2. Repeat the steps in the Create a Rate Code and Select a GL Control workshop tasks to add a rate code and
GL control to the XXX-City rate type using the following information:
Field

Data

Rate Code

CityRate

Description

City Tax Rate

Default Rate

Selected

GL Control Type

Tax

GL Control Code

VAT-RATE08

3. Repeat the steps in the Create an Effective Rate workshop task to add an effective rate to the CityRate rate
code using the following information:
Field

Data

Effective From

Today's date

Rate Type

Percentage

Percentage

3.5

Currency

United States Dollar

Compare At

Line Level

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Scenario 3: Set Multiple Rates, Exemptions, and Tax Categories

Tax Engine Course

Create a Local Tax Type


1. Repeat the steps in the Create a VAT Tax Type workshop task to create a City Tax type using the following
information:
Note Replace XXX with your initials.
Important Click Save after each step.

Field

Data

Tax ID

XXX-Local

Description

XXX Local Tax

Collection Method

Invoicing

2. Repeat the steps in the Create a Rate Code and Select a GL Control workshop tasks to add a rate code and
GL control to the XXX-Local rate type using the following information:
Field

Data

Rate Code

LocalRate

Description

Local Tax Rate

Default Rate

Selected

GL Control Type

Tax

GL Control Code

VAT-RATE08

3. Repeat the steps in the Create an Effective Rate workshop task to add an effective rate to the LocalRate
rate code using the following information:
Field

Data

Effective From

Today's date

Rate Type

Percentage

Percentage

1.5

Currency

United States Dollar

Compare At

Line Level

4. Exit Tax Type Maintenance.

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Scenario 3: Set Multiple Rates, Exemptions, and Tax Categories

Workshop - Set Up a Tax Liability


In this workshop, create a tax liability to include all the tax types created in the Workshop - Create Tax Types.
Navigate to Tax Liability Maintenance.
Menu Path: Financial Management > Accounts Payable > Setup > Tax Liability

Create the Tax Liability


1. From the New menu, select New Liability.
2. In the Tax Liability field, enter XXX (where XXX are your initials).
3. In the Description field, enter XXX Taxes (where XXX are your initials).
4. Click Save.

Assign Tax Types to the Tax Liability


1. From the New menu, select New Tax Type.
The Taxes > Detail sheet displays.
2. In the Tax Type field, select XXX VAT (where XXX are your initials).
3. In the Tax Method field, verify Line Level displays.
4. In the Exemption field, verify No Exempt displays.
5. Click Save.
6. Repeat steps 1 - 5 to add the following three tax types created in the Workshop - Create Tax Types (where
XXX are your initials):
XXX Perception
XXX City Tax
XXX Local Tax
7. Exit Tax Liability Maintenance.

Assign the Tax Liability to a Customer


Navigate to Customer Maintenance.
Menu Path: Financial Management > Accounts Receivable > Setup > Customer
1. In the Customer field, search for and select Dalton Manufacturing.
2. Navigate to the Billing > Detail sheet.
3. In the Tax Liability field, enter the tax liability XXX (where XXX are your initials) created in the Create a
Tax Liability workshop task.

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4. Click Save.
5. Exit Customer Maintenance.

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Scenario 3: Set Multiple Rates, Exemptions, and Tax Categories

Workshop - Create Product Tax Categories


In this workshop, create new product tax categories: one for goods exempt from VAT and one for utilities which
are subject to the reduced VAT and related tax rates. Then assign a tax category to a part.
Navigate to Product Tax Category Maintenance.
Menu Path: Financial Management > Accounts Receivable > Setup > Tax Product Category

Create an Exempt Category


1. From the New menu, select New Tax Category.
2. In the Category field, enter Exempt.
3. In the Description field, enter Exempt Goods.
4. Click Save.

Create a Utilities Category


1. From the New menu, select New Tax Category.
2. In the Category field, enter Utilities.
3. In the Description field, enter Utilities Reduced Rate.
4. Click Save.
5. From the New menu, select New Tax Rate.
The Tax Rate > Detail sheet displays.
6. In the Tax Type field, select XXX VAT (where XXX are your initials).
Note This is the description for the first tax type created in the Workshop - Create Tax Types.

7. In the Rate Code field, select Reduced VAT Rate.


8. Click Save.
9. Repeat steps 5 - 8 to add the tax rates created in the Workshop - Create Tax Types, using the following
information (where XXX are your initials):
Tax Type

Rate Code

XXX Perception

Reduced Perception Rate

XXX City Tax

City Tax Rate

XXX Local Tax

Local Tax Rate

10. Exit Product Tax Category Maintenance.

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Scenario 3: Set Multiple Rates, Exemptions, and Tax Categories

Tax Engine Course

Assign a Tax Category to Parts


Navigate to Part Maintenance.
Menu Path: Service Management > Field Service > Setup > Part
1. In the Part field, search for and select Bookings.
2. In the Tax Category field, select Utilities Reduced Rate.
3. Click Save.
4. In the Part field, search for and select MB1900.
5. In the Tax Category field, select Exempt Goods.
6. Click Save.
7. Exit Part Maintenance.

Enter an Exemption in Tax Types


Navigate to Tax Type Maintenance.
Menu Path: Financial Management > Accounts Payable > Setup > Tax Type
1. In the Tax ID field, search for and select XXX-VAT (where XXX are your initials).
2. From the New menu, select New Exempt Category.
The Rates > Exempt sheet displays.
3. In the Category ID field, select Exempt Goods.
4. In the Exemption field, select Fully Exempt.
5. Click Save.
6. Repeat steps 1 - 5 for the tax type XXX-PER (where XXX are your initials).
7. Exit Tax Type Maintenance.

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Scenario 3: Set Multiple Rates, Exemptions, and Tax Categories

Workshop - Enter Sales Invoices


In this workshop, enter a sales invoice with three lines. The first line is for a product subject to the normal VAT
and Perception rates, the second line is for a product subject to the reduced VAT and Perception rates, and the
third line is exempt from VAT and Perception rates.
Navigate to AR Invoice Entry.
Menu Path: Financial Management > Accounts Receivable > General Operations > Invoice Entry

Create an Invoice Header


1. From the New menu, select New Group.
2. In the Group field, enter XXX (where XXX are your initials).
3. Click Save.
4. From the New menu, select New Miscellaneous Invoice.
The Header > Detail sheet displays.
5. In the Sold To Customer field, search for and select Dalton Manufacturing.
6. Click Save.

Create Invoice Lines


1. From the New menu, select New Line.
The Line > Detail sheet displays.
2. In the Part/Rev... field, enter Mem1.
3. In the Quantity field, enter 5.
4. In the Unit Price field, enter 20.
5. Click Save.
6. Repeat steps 1 - 5 to create two more invoice lines using the following information:
Line

Part/Rev

Quantity

Unit Price

Bookings

100

MB1900

50

Review the Tax and Post the Invoice


1. From the Actions menu, select Group > Edit List.
The Invoice Entry - Group Edit List window displays.

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Scenario 3: Set Multiple Rates, Exemptions, and Tax Categories

Tax Engine Course

2. Click Print Preview.


The AR Invoice Edit List displays.
3. Review the breakdown of the taxes.
4. Close the AR Invoice Edit List.
5. Close the Invoice Entry - Group Edit List window.
6. From the Actions menu, select Group > Post.
The AR Invoice Post Process window displays.
7. Click Submit.
8. Close the AR Invoice Post Process window.
9. Exit AR Invoice Entry.

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Reports

Reports
Use the following reports to view tax transaction information.

Sales Tax Report


Use the Sales Tax Report to view details of transactions that involve reportable Accounts Receivable (AR) taxes.
You can restrict the report to specific dates, and can filter by Tax Type and Tax Region.
Menu Path
Navigate to this program from the Main Menu:
Financial Management > Accounts Receivable > Reports > Sales Tax

Use Tax Report


Use the Use Tax Report to view details of transactions that involve reportable Accounts Payable (AP) taxes.
You can restrict the report to specific dates and can filter by Tax Type and Tax Liability.
Menu Path
Navigate to this program from the Main Menu:
Financial Management > Accounts Payable > Reports > Use Tax

VAT On Settlement Report


Use the VAT On Settlement Report to view the outstanding taxable balances on items that have been invoiced
but are not fully reported, as they have not been paid.
This is required to show tax authorities the difference between the tax shown on invoices and the values shown
in tax reports and to verify the corresponding General Ledger (GL) balance held on the interim GL tax account.
You can restrict the report to a specific cut-off date and can filter by Tax Liability and Tax Type. You can display
data from Accounts Receivable (AR), Accounts Payable (AP), or both.
You also have the option to display the report on a GL Summary level for a specific book.
Menu Path
Navigate to this program from the Main Menu:
Financial Management > Accounts Payable > Reports > Deferred VAT
Financial Management > Accounts Receivable > Reports > Deferred VAT

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Reports

Tax Engine Course

Withholding Tax Certificate


Use Withholding Tax Certificate to create a tax certificate to inform suppliers of taxes withheld on behalf of
their tax liability.
You can print a certificate periodically or after each invoice or payment, depending on your requirements.
Use Legal Numbers Maintenance to set up legal numbers for certificate numbers to be numbered automatically,
as required in some countries.
You can select the tax certificates to print by applying filters and a date range. The Epicor application can print
separate documents for each supplier, tax type with a collection method of Withholding, and currency. You can
also select an option to print separate documents per invoice or per payment.
Menu Path
Navigate to this program from the Main Menu:
Financial Management > Accounts Payable > Reports > Withholding Tax Certificate

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Conclusion

Conclusion
Congratulations! You have completed the Tax Engine course.

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Additional information is available at the Education and


Documentation areas of the EPICweb Customer Portal. To access
this site, you need a Site ID and an EPICweb account. To create an
account, go to http://support.epicor.com.