BTerrell Group Blog

Configuring Intacct for Sales Tax Compliance Part 1

Posted by Michelle Tanner on Tue, May 06, 2014

by Chris Firra


I recently attended Intacct’s Advanced Implementation Training, where a variety of topics were examined. One of the class exercises caused me to think about the controller's chore of maintaining sales tax compliance when a company has multi-state tax liabilities. It's a task that is often under-appreciated in terms of its complexity and risk.   


Imagine that you are the controller of a services company with customers dispersed in an expanding number of states and localities. You select Intacct as your new best-of-breed, cloud-based accounting system, and you decide that your customer invoicing may be done through the A/R module. However, when you reach the point of configuring sales tax, you see that Intacct provides two options to handle your multi-state sales tax requirements, and you now wonder which option to select.  


Today, I'll focus on the first of these options, "Advanced Tax configuration." Sales and use tax calculation is built into Accounts Receivable, Order Entry, Accounts Payable and Purchase Order modules, so there are no additional subscriptions required to implement this strategy. The initial set up is straight-forward, but can be somewhat lengthy. As implied in the slide below (thanks to Intacct instructor, David Bell), sales tax configuration involves adding tax authorities with corresponding rate details, tax schedules, and then defining the taxability of both customers and items by "tagging" them with the appropriate tax group.


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Let's examine the required configuration steps for setting up the first tax jurisdiction when billing is done through A/R.  


Step 1: Configure Accounts Receivable or Order Entry to enable sales tax calculation on A/R invoices and to enable the use of Tax Schedules, the purchase of which we will see a little bit later.

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Step 2: Set up each Tax Authority for which the company has nexus. Keep in mind that the name of tax authority cannot contain non-alphanumeric fields, such as commas. An example of a valid tax authority might be City of Dallas TX or Cook County IL.

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Step 3: Create corresponding Tax Details, which contain the tax rates for each Tax Authority. There should be at least one tax detail for each tax authority.

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Step 4: Create a tax schedule for each locality or combination of tax rates that will be encountered. For example, you'll need a Tax Schedule for taxable sales within the City of Dallas, TX, which will be subject to the combination of sales tax from the State of Texas, City of Dallas and the Dallas Mass Transit Authority.

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Step 5: Tag each item sold within a tax group (Taxable or Non-taxable).
Step 6: Tag each customer with a contact tax group indicating jurisdiction in Customers Additional Information tab under Invoicing details. 

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If invoices are generated from Order Entry, there is are additional steps, which include tagging each taxable sales item with a tax group and setting up Tax Schedule Map for each jurisdiction. 


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Of course, a tax line must also be part of the invoice Transaction Definition in order to calculate and display sales tax amount on a customer invoice.


Once these configurations for Advanced Tax set up complete, invoices for multiple tax authorities can be generated and tracked.


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However, the controller's job of maintaining the sales tax configuration is not done and, in fact, it never quite is. Each new tax jurisdiction must be added and tax rates as well as item tax treatments must be maintained. This task is manageable, as long as the number of tax jurisdictions is not overwhelming. However, in a multi-state setting, the number of tax jurisdictions could number in the hundreds. Changing tax rates and tax treatment of items can require a near full-time employee equivalent to maintain the system.


In a future article, we'll take a look at the second option for Sales Tax in Intacct, which uses Ava-Tax, to reduce both the labor and risks of maintaining sales tax compliance in a complex environment. Please contact BTerrell Group if you have questions about the best method for maintaining sales tax compliance for your company.


Tags: sales tax, sales and use tax, Intacct