Tax classes can be assigned by cost type in Job Cost Options. These tax classes only apply to time and material jobs in Job Billing Data Entry since fixed contract jobs billing amounts are based on the percent of the contract being billed.
In the Sales Order module, tax classes default from the item code in Item Maintenance or Miscellaneous Item Maintenance for inventory or miscellaneous items and charges, but special items default to tax class TX. Tax classes can be changed during Sales Order Entry and S/O Invoice Data Entry.
Tax is calculated on estimates if there is a valid tax schedule entered on the estimate. If using Estimate Update to Jobs to create jobs, and a valid tax schedule is entered on the estimate, the contract amount and revised contract amount will include the sales tax amount from the estimate.
Tax can also be calculated on retention if the Calculate Sales Tax on Retention check box is selected for the tax code in Sales Tax Code Maintenance, and the Calculate Sales Tax on Retention Invoices check box is selected in Job Cost Options.
-
If these check boxes are both selected, any “less retention” is deducted from the invoice total before tax is calculated, and then tax is charged on the retention invoice.
-
If these check boxes are cleared, “less retention” is not used to calculate sales tax and sales tax is not charged on retention invoices.
Note Changing these check boxes after the “less retention” invoice is done is not recommended since the taxable retention amounts are recorded when the original invoice is posted.
For invoices entered in Job Billing Data Entry and A/R Invoice Entry, tax schedules, and their associated tax codes, default from the Customer file. For invoices entered in the Sales Order module, the customer tax schedule or ship-to tax schedule is used.
Examples for Job Billing Data Entry
Time and Material Job
Costs being billed include nontaxable labor and taxable material. Job has a 5% retention rate. During Job Billing Data Entry, the default tax class from Job Cost Options was not changed. Tax codes do not calculate sales tax on retention, and the setting in Job Cost Options to calculate sales tax on retention is then ignored.
Contract Billing:
|
Labor cost billed (NT)
|
1120.00
|
|
Material cost billed (TX)
|
31150.00
|
|
Amount billable for this invoice
|
32270.00
|
|
Sales Tax (31150 * 6%)
|
1869.00
|
|
Less Retention (32270 * 5%)
|
1613.50
|
|
Invoice Total
|
32525.50
|
Retention Billing:
|
Retention amount billed
|
1613.50
|
|
Sales Tax (nontaxable)
|
.00
|
|
Invoice Total
|
1613.50
|
Time and Material Job
Costs being billed include nontaxable labor and taxable material. Job has a 5% retention rate. During Job Billing Data Entry, the default tax class from Job Cost Options was not changed. Tax codes calculate sales tax on retention, and the setting in Job Cost Options to calculate sales tax on retention is also selected.
Contract Billing:
|
Labor cost billed (NT)
|
1120.00
|
|
Material cost billed (TX)
|
31150.00
|
|
Amount billable for this invoice
|
32270.00
|
|
Sales Tax ({31150 - [31150. * 5%]} * 6%)
|
1775.55
|
|
Less Retention (32270 * 5%)
|
1613.50
|
|
Invoice Total
|
32432.05
|
Retention Billing:
|
Retention amount billed
|
1613.50
|
|
Sales Tax ({31150 * 5%} * 6% ) - (only material portion was taxable; taxable = 1557.50, nontaxable = 56.00)
|
93.45
|
|
Invoice Total
|
1706.95
|
Examples Retention Only Invoices
Retention only invoices can only be billed in Job Billing Data Entry, so “less retention invoices” entered in the Sales Order module must be followed up (at some point) with an RT invoice in Job Billing Data Entry to bill the retention balance. To summarize, Sales Order bills every line, taxable and nontaxable, and does not utilize the contract amount to bill the job. During the sales journal update, WIP can be cleared for percent complete jobs based on the Sales Journal posting date.
Taxable Fixed Job
6% tax rate, and 5% retention. Retention is not taxable. Contract amount is $75,628.83 and billing at 35% complete. Tax code does not calculate sales tax on retention; therefore, the setting in Job Cost Options to calculate sales tax on retention is ignored.
Contract Billing:
|
Billable contract amount
|
26470.09
|
|
Less Retention (26470.09 * 5%)
|
1323.50
|
|
Sales Tax (26470.09 * 6%)
|
1588.21
|
|
Invoice Total
|
26734.80
|
Retention Billing:
|
Retention for this invoice
|
1323.50
|
|
Sales Tax
|
.00
|
|
Invoice Total
|
1323.50
|
Taxable Fixed Job
6% tax rate and 5% retention. Retention is not taxable. Contract amount is $75,628.83 and billing at 35% percent complete. Tax code does calculate sales tax on retention; therefore, the setting in Job Cost Options to calculate sales tax on retention is used.
Contract Billing:
|
Billable contract amount
|
26470.09
|
|
Less Retention (26470.09 * 5%)
|
1323.50
|
|
Sales Tax ({26470.09 - [26470.09 * 5%]} * 6%)
|
1508.80
|
|
Invoice Total
|
26655.39
|
Retention Billing:
|
Retention for this invoice
|
1323.50
|
|
Sales Tax ([26470.09 * 5%] * 6%)
|
79.41
|
|
Invoice Total
|
1402.91
|
Examples for Sales Order Invoice Data Entry, Time and Material, or Fixed jobs
In S/O Invoice Entry, the tax class defaults from CI_Item for the inventory items, miscellaneous items, and miscellaneous charges. For special items the tax class defaults to TX. In this example, all items were taxable, but two of the four lines were changed to nontaxable during invoice entry.
Calculate Sales Tax on Retention = N (either option)
Lines taxable or nontaxable default from items, but it can be changed.
Item 1 with TX as the tax class. Quantity 18 @ $50.00 each | 900.00 |
Item 2 with NT as the tax class. Quantity 4 @ $55.00 each | 220.00 |
Item 3 with NT as the tax class. Quantity 10 @ $100.00 each | 1000.00 |
Item 4 with TX as the tax class. Quantity 3 @ $10050.00 each | 30150.00 |
Subtotal | 32270.00 |
Sales Tax ({900.00 + 30150.00} * 6%) | 1863.00 |
Less Retention (32270 * 5%) | 1613.50 |
Invoice Total (less retention) | 32519.50 |
Note When the RT billing is done for the invoice, the retention amount of $1613.50 will be nontaxable. |
Calculate Sales Tax on Retention = Y (for Job Cost Options and tax code)
Lines taxable or nontaxable default from items, but it can be changed.
Item 1 with TX as the tax class. Quantity 18 @ $50.00 each | 900.00 |
Item 2 with NT as the tax class. Quantity 4 @ $55.00 each | 220.00 |
Item 3 with NT as the tax class. Quantity 10 @ $100.00 each | 1000.00 |
Item 4 with TX as the tax class. Quantity 3 @ $10050.00 each | 30150.00 |
Subtotal | 32270.00 |
Sales Tax ({900.00 + 30150.00} - {[30150.00 + 900.00] * 5%} * 6%) | 1769.85 |
Less Retention (32270 * 5%) | 1613.50 |
Invoice Total (less retention) | 32426.35 |
Note When the RT billing is done for the invoice, the retention amount of $1613.50 includes taxable retention of $1552.50 and $93.15 in tax will be charged on the retention invoice. |
For more information, see:
Job Cost Options
Job Billing Data Entry
Item Maintenance
Miscellaneous Item Maintenance
Sales Order Entry
S/O Invoice Data Entry
Estimate Update to Jobs
Sales Tax Code Maintenance
A/R Invoice Data Entry
Show/Hide All