AP Invoice Tax

When entering the tax code on an AP Invoice, you first need to decide which of the following four scenarios you are dealing with:

  1. Tax not owed, tax not paid
  2. Tax owed and paid
  3. Tax owed but not paid (underpaid)
  4. Tax paid but not owed (overpaid)

1. Tax not owed, tax not paid

This is by far the simplest scenario. If there is no sales tax owed on a purchase, and no tax was collected by the vendor, simply set the Tax Amount to 0 and leave the tax code blank on all lines

2. Tax owed and paid

In this scenario, the correct tax amount was collected by the vendor. You have 2 options here:

A. Leave the Tax amount zero, and simply add the tax amount into the total amount on the invoice. This can be done as long as there is no reporting necessary on tax collected at the source

B. Enter the total tax amount in the Tax Amount field and put the correct sales tax code on each line

3. Tax owed but not paid (underpaid)

In this case, the vendor did not withhold tax but tax needs to be paid to the state.
For example: purchases made in Oregon, where no tax was charged on the invoice but tax will need to be paid

  1. Enter the invoice the same as a standard invoice until reaching the detail line.
  2. Select Use Tax with the correct tax percentage as the tax code.
  3. Update the Tax Amount in the header with the total tax amount owed
  4. Add invoice, update the batch. 
  5. Review the transaction report to ensure that the invoice (the top section of the report) shows only the amount paid, and the G/L Impact (the bottom section of the report) shows that the tax was applied to Sales Tax Payable. 

4. Tax paid but not owed (overpaid)

To enter AP Invoices when sales tax was paid, but should not have been paid. 

  1. Enter batch information as a standard invoice
  2. In the header section, enter the paid tax amount as a part of the total invoice amount.
  3. In the details section, enter a separate line item for 2550 G/L account for the paid tax amount.
  4. Do not select a tax code for any line items in the details section. 
  5. Process batch.