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dynamiczip:faq:items_partially_taxable_faq

How do I handle items that are partially taxable?

Some states tax certain items at a percentage of the normal rate or tax only a portion of the sales amount for a particular item.

The best way to handle these situations is to use the DynamicZip Tax By Item Category feature.

Solution 1

Company A needs to charge only 50% of the normal tax rate (or tax only 50% of the sales amount, the effect is the same) on widgets sold in Illinois, but must continue to collect the normal amount of taxes on other items (and on widgets sold in other states). Company A only collects state sales taxes. In order to collect the proper amount of taxes, Company A splits the state tax detail in two. Since Illinois taxes sales at the rate of 6.25%, they create two details, ILSTATE50-1 and ILSTATE50-2 - each with a tax rate of 3.125%. They then create two custom tax schedules - ILSTATE50, which contains the detail ILSTATE50-1, and ILSTATE100, which contains both custom details.

In the DZ State Setup window ILSTATE100 is selected as the statewide taxable ID for Illinois.

Create a Widgets item category using the DZ Item Category Maintenance window. With the DZ Item Supplement window assign all widget inventory items to the Widgets item category.

HINT: To add multiple items to an item category you may want to use the DZ Modify Item Supplement window.

In the DZ Tax By Item Category Setup window IL is selected as the state, Widgets as the Item Category and taxable as the Tax Option ILSTATE50 is entered as the Tax Schedule.

Finally, the Assign Customer Tax Schedules routine is run to apply the statewide tax schedule to all taxable customers in Illinois.

Now when Company A enters widgets on a line item for a customer in Illinois, Microsoft Dynamics GP compares the details in the item's schedule (ILSTATE50) with those in the customer ship-to tax schedule (ILSTATE100) and applies only the details common to both (ILSTATE50-1). Other items entered on the invoice use both custom details and are taxed at the normal rate.

Solution 2

Handling this situation becomes more complicated when county and city sales taxes must also be collected. In this case, a statewide tax schedule would not work. Instead, a custom tax schedule would be used for the widget inventory items while all other items would use Zip Code Tax Schedule.

In the DynamicZip Setup window the Tax by Item Category and Use ATC with TBIC options must be enabled. On the DZ State Setup window IL needs the Import ZIP Code tax Schedules option enabled.

Create a Widgets item category using the DZ Item Category Maintenance window. With the DZ Item Supplement window assign all widget inventory items to the Widgets item category.

HINT: To add multiple items to an item category you may want to use the DZ Modify Item Supplement window

Create a custom tax schedule with an ID of “ILWIDGETS”. Using the DZ Modify Tax Schedules window add every tax detail from “IL” to “ILz” to the ILWIDGETS schedule. Using the Tax Schedule Maintenance window remove the ILSSILLINOI001 tax detail from the ILWIDGETS schedule. Save the tax schedule.

Create a new tax detail called ILSSWIDGETS with the Tax Detail Maintenance window and setup this detail with a 3.125% tax percentage. Save the ILSSWIDGETS detail.

In the DZ Tax Detail Supplement window set the ILSSWIDGETS detail's Authority to “State”, Administrator to “Illinois: State”, State to “IL”, Geocode to “17” and Import Status to “Update Neither”. Press the Save button.

Reopen the Tax Schedule Maintenance window and add the ILSSWIDGETS detail to the ILWIDGETS schedule.

Open the DZ Tax By Item Category Setup window and enter “IL” for the state, your Widgets item category and set the Tax Option to Taxable. In the Tax Schedule ID field enter “ILWIDGETS”. Press Save.

Configured in this way the results will be that widgets would be taxed normally in Illinois cities and counties but only at half the IL state tax rate.

Solution 3

If widgets in Illinois are not subject to the general state, counties, or cities sales taxes but are taxed by a special Illinois widget tax, then a custom tax schedule and detail need to be used for all widget sales in IL.

Create a Widgets item category using the DZ Item Category Maintenance window With the DZ Item Supplement window assign all widget inventory items to the Widgets item category.

HINT: To add multiple items to an item category you may want to use the DZ Modify Item Supplement window.

Create a tax detail for Illinois' widget tax. Open the DZ Tax Detail Supplement window and set the widget tax detail's Authority to “WIDGET TAX”, Administrator to “Illinois: State”, State to “IL”, Geocode to “17” and Import Status to “Update Neither”. Press the Save button.

Using the Tax Schedule Maintenance window create a tax schedule with an ID of “ILWIDGETS” and add the IL widget tax detail to the schedule.

Open the DZ Tax By Item Category Setup window and enter “IL” for the state, your Widgets item category and set the Tax Option to Taxable. In the Tax Schedule ID field enter “ILWIDGETS”. Press Save.

Now all widget sales in Illinois will be taxed by a special widget tax. All other items will continue to be taxed by the general state, county and city sales taxes.

IMPORTANT: In Solution 2 all tax details for the state in question (IL in this example) are added to a custom tax schedule. The Rate & Boundary Import will continue to update the state's tax details and Zip Code Tax Schedule but will not update the custom schedule (ILWIDGETS). As a result, if new taxes are created in the state or old taxes are retired then manual addition/removal of the appropriate tax detail(s) should be done for the custom schedule.


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dynamiczip/faq/items_partially_taxable_faq.txt · Last modified: 2017/09/07 22:04 by conni