How Tax Date Source Determines Your Contract Tax Rate

Point of Rental Elite calculates tax by sending your tax engine a Document Date, and the Tax Date Source setting controls whether that date is a contract's out date or the date the calculation is made , which is why two otherwise identical contracts can end up taxed at different rates. After reading this article, you'll be able to choose the Tax Date Source option that fits how your company accounts for tax, understand why a rate changed on a given contract or credit, and confirm which date was actually used for any calculation.

Applies To

This article is for anyone in your organization who decides how tax is calculated in Point of Rental Elite or who reconciles tax on invoices and credits. No special permissions required.

For help choosing a setting for your operation, or to review how a specific invoice or credit was calculated, contact your Point of Rental account team or Support. Please have the contract number and, where applicable, the credit number available.

Topics Included in This Article

• Before You Begin

• How Tax Date Source Determines Your Tax Rate

• Choosing Between Contract Open Date and Current Date

• How the Setting Applies Over a Contract's Lifetime

• How Continuation Billing Is Taxed

• Why Credit Adjustments Don't Use Tax Date Source

• Confirming Which Date Was Used for a Calculation

• FAQs

Before You Begin

• This setting applies to your whole company at once. You cannot set different options by store, region, or state, and a contract keeps whatever setting was active when it was created for its entire life. That means after you change the setting, expect a period where older and newer contracts calculate tax differently , this is expected, not an error.
   

• Credit adjustments never use this setting, no matter which option you have configured. If a credit's tax amount looks wrong, Tax Date Source is not the cause , see Why Credit Adjustments Don't Use Tax Date Source below.

How Tax Date Source Determines Your Tax Rate

When Elite calculates tax, it sends your tax engine a transaction along with a Document Date. Your tax engine returns the rate that was in effect for that date and jurisdiction , so the Document Date is what actually determines the rate applied. The Tax Date Source setting controls which date Elite uses as the Document Date.

This setting is configured at the company level. One option applies to every contract created anywhere in your organization; it cannot be varied by store, region, or state.

There are two options:

• Contract Open Date , Elite sends the contract's out date (the date the contract starts) as the Document Date. Tax uses the rate in effect on that date.
   

• Current Date , Elite sends the date the calculation is made as the Document Date. The amount is only finalized once the invoice is created.

Example:

 A jurisdiction's rate changed from 8.50% to 8.70% on April 1, and a contract's out date is March 12.

• Under Current Date, backdating a contract does not change its rate, a contract with a March out date is still taxed at whatever rate is in effect when the calculation is made. The out date affects the rental period and billing, not the tax.
   

• Also under Current Date, the rate can change while a contract is still open: for as long as the current date is still in March, calculations return 8.50%; once April 1 arrives, calculations return 8.70%. The figure that matters is the one calculated when the invoice is created, because that's when tax is finalized , so a contract quoted in March at 8.50% but invoiced in April is invoiced at 8.70%.

Choosing Between Contract Open Date and Current Date

Neither option is universally correct , the right choice depends on how your company accounts for tax and what your tax advisors require.

Contract Open Date:

• Tax follows the contract's own dates. A contract with a March out date is taxed at March's rate.

• Useful when tax needs to correspond to the period being billed, particularly on long-running rentals that span a rate change.

• Backdated contracts are taxed at the historical rate for their out date.

Current Date:

• Tax follows the date each calculation is made, not the contract's dates. The binding amount is the one calculated at invoicing.

• Each tax calculation is its own transaction , a quote taken while the contract is open and the invoice created when it closes are calculated at different times, so if a rate changes between them, the amounts will differ.

• Simpler to reconcile, since all tax posted in a given period reflects the rate in effect during that period.

• Contracts with an out date before a rate change are still taxed at the new rate.

Tax compliance is your company’s responsibility Which option meets your obligations depends on your jurisdiction, your filing method, and your tax advisors' guidance. Point of Rental provides the configuration; determining the correct treatment for your business is your company’s decision.   This matters particularly if you file in multiple states. Requirements can differ from state to state, and the setting cannot be varied by store or by state — one option applies to your whole company. Choose the option that best fits your obligations across all of the jurisdictions you operate in. Where those requirements differ, that choice is a judgment for your tax advisors to make.

How the Setting Applies Over a Contract's Lifetime

A contract keeps the Tax Date Source configuration that was active when it was created, for the entire life of that contract. Changing the setting later does not alter contracts that already exist.

Two different things are involved here, and it's worth keeping them separate: which setting applies to a contract is fixed when the contract is created, but what that setting does with the contract's dates depends on which option is configured.

Because the setting is company-wide, a change applies to every new contract across your organization at once. There is no way to phase it in by store or region.

• Under Contract Open Date, the rate comes from the contract's out date , despite the option's name, it's the out date being used, not the date the contract record itself was created.
   

• Under Current Date, the out date isn't used at all , the rate comes from the date the calculation is made, so backdating has no effect.

Tax Date Source is configured separately for quote calls and posting calls.

A posting call is the tax calculation made when an invoice or a credit is created; a quote call is every other tax calculation. Unless you have a specific reason not to, set both to the same option. (Credit adjustments do not use the Tax Date Source setting at all, even though they are posting calls , more on that below.)

This produces two practical consequences:

• A change takes effect going forward only. Contracts created after the change use the new setting; contracts created before it continue using the old one.
   

• During a transition, both behaviors will be in use at once. This is expected, not an error.

Because of this, decide on a setting before a busy billing period rather than during one, and communicate the change date to whoever reconciles your tax.

How Continuation Billing Is Taxed

When a contract is billed and continues into a new period, Elite closes the current period, generates its invoice, and creates a continuation contract for the next period.

Each contract in that chain is taxed on its own dates. Under Contract Open Date, an original contract with a March out date is taxed at March's rate, and the continuation contract with an April out date is taxed at April's rate. Under Current Date, each contract is taxed at the rate in effect when its own invoice is created. This means that under Contract Open Date, a single rental that runs across a rate change will show different rates on successive invoices , each invoice reflects the rate in effect for the period it covers. This is intended behavior.

Tax is locked when the invoice is created: closing a contract period finalizes its tax, and the tax on a completed invoice cannot be recalculated or changed afterward. Any adjustment has to be made by issuing a credit (see below).

A continuation contract can still be edited before it's billed. If, for example, the delivery address changes, the next invoice is calculated for the new address and jurisdiction; invoices already generated are not affected, and neither are credits issued against them.

Why Credit Adjustments Don't Use Tax Date Source

A credit adjustment does not use the Tax Date Source setting, regardless of which option is configured. Instead, it references the contract or invoice it was created from and uses that document's rate , reversing tax at the rate originally charged.

For example, a credit issued against a March invoice reverses tax at March's rate, and a credit issued against an April invoice reverses tax at April's rate, regardless of when the credit itself is created.

A credit is technically a posting call, but it does not use the Tax Date Source setting , its rate always comes from the document being credited. This is what allows credits to offset the original invoice cleanly for reconciliation and filing.

If a credit does not match the original invoice

The invoice is locked when created,  its line items, quantities, amounts, address and jurisdiction cannot change. One value used in the calculation sits outside the invoice:

• Exemption status has changed. Exemption status is configured on the product and customer records, not on the invoice. If it changes after the invoice is created, a credit issued afterwards uses the new status and will be incorrect.
  
  

Tax Date Source is never the cause; a credit always uses the rate from the document being credited. To investigate a mismatch:

• Verify that no tax exemption changes have been made. Check every product on the contract, and the customer record, for changes made since the invoice was created.
   

• Compare the credit with the original invoice line by line to identify which amounts differ.
   

• If neither explains the difference, contact Point of Rental Support with the contract number, the credit number and both tax amounts.

Confirming Which Date Was Used for a Calculation

Your tax engine's log records the Document Date Elite sent. Two fields appear there, and they serve different purposes:

• Document Date , the date Elite sent for the rate lookup. This is the field to check when confirming behavior.
   

• Posted Date , the date the request was made. It does not affect the rate.

Under Contract Open Date, Document Date shows the contract's out date. Under Current Date, it shows the date the calculation was made. On a credit adjustment, it shows the date of the document being credited.

More Information / FAQ

Q: Why might a credit not match the tax amount on the invoice it's crediting?
A: The invoice itself is locked once created , its line items, quantities, amounts, address, and jurisdiction can't change. But exemption status is configured on the product and customer records, not on the invoice. If exemption status changes after the invoice is created, a credit issued afterward uses the new status and can come out incorrect.

Q: What should I check first if a credit and its original invoice don't reconcile, and who do I contact if I still can't find the reason?
A: First, verify that no tax exemption changes have been made , check every product on the contract and the customer record for changes made since the invoice was created. Then compare the credit and the original invoice line by line to identify which amounts differ. If neither explains the difference, contact Point of Rental Support with the contract number, the credit number, and both tax amounts.

Q: The tax engine's log only shows dollar totals, not a rate , how do I figure out the actual rate that was applied?
A: Divide the tax total by the pre-tax amount to derive the effective rate.

Q: Where do I find full step-by-step instructions for processing a tax credit adjustment?
A: See the separate "External Tax Credit Adjustments" article for the full process.