Elite | External Tax Credit Adjustments

This article explains the importance of Closed Accrual Accounting when integrating with an external tax solution, ensuring that tax adjustments are handled through credits rather than modifying closed contracts. It details how to correctly issue tax-only credits and full invoice credits while maintaining compliance with tax exemptions and accurate tax calculations based on delivery flags and addresses. It also identifies the methods that must not be used to credit an invoice.

Topics included in this article

• Credits Must Be Made Against the Invoice

• Closed Accrual Accounting

• Tax-Only Credits

• Full Invoice Credits

• Modifying Closed Contracts

• Tax Calculation and Delivery Flags

• Continuation Billed Contracts

• Methods That Do Not Credit an Invoice

Credits Must Be Made Against the Invoice 

There is only one proper way to credit tax or to credit a full invoice: modify the existing invoice. This applies to both types of credit described in this article, tax-only credits and full invoice credits.

This is the only method that credits the invoice itself, including its tax. Every procedure below assumes it.

Elite provides other ways to place a credit on a customer account. These are valid for their own purposes but must not be used to credit an invoice. An account credit can be applied against an invoice, but applying it does not credit the invoice and the tax originally charged is not reversed. The customer receives the credit while the tax remains as billed and reported, and this will not appear as a discrepancy when comparing Elite to the tax service, because no credit was ever applied to the invoice. See Methods That Do Not Credit an Invoice below.

Closed Accrual Accounting

Closed Accrual Accounting is required when integrating with an external Tax solution.
    

When using an integrated sales tax solution, Closed Account & Cash Mods are automatically turned on and cannot be disabled. The closed contract (invoice) that is modified will remain unchanged, but an adjustment (credit) for the changes will be created.

Exemptions must not change between the invoice and the credit It is important that no modifications are made to the Customer or products related to tax exemptions. To ensure accurate credits, all sales tax codes/classes (exemptions) must remain the same as when the original contract was closed.

Tax-Only Credits

Crediting tax only off a contract: modify the existing invoice and check the non-taxable box on the information tab of the contract, then save the contract. This creates a credit for the tax only.

The non-taxable box on the contract is not the same as the Tax Exempt flag on a customer record or the Non-Taxable flag on an item record, which must never be used. Checking the box on the contract leaves everything on the invoice unchanged except the tax, which is credited back.

Full Invoice Credits

To fully credit an invoice, modify the existing invoice and zero out the price on each line item so that the contract total is $0.00, then close out the contract. This will create a credit for the exact amount of the invoice.
    

The original contract will include a call log that appears for every credit created. They can use the Related Contract Lookup tool to view the credits and the details of what was credited. This can be used to verify that multiple credits are not created for the same purpose.

Modifying Closed Contracts

When modifying a closed contract, you cannot change the quantity of rental items; however, you can adjust the price. You can change the quantity of sold assets or sale items, which will create a credit for the difference.

Tax Calculation and Delivery Flags

Sales tax is calculated based on the contract's delivery flag. If delivery is not flagged, tax will be calculated based on the contract store’s address. If Delivery is flagged, tax is calculated based on the delivery address on the contract. Sales tax integrations support passing the ZIP+4 from POR to ensure the most accurate tax calculation.
    

Vertex: If the full street address is not provided, the tax will default to the highest tax rate for that zip code (this can be changed to default to the lowest tax rate, but is not recommended).
     

SureTax (CCH): Delivery addresses are validated as part of the integration and will produce an error message to the user if the address is incorrect.

Continuation Billed Contracts

For continuation-billed contracts, the original parent contract determines only whether delivery is flagged. This applies even if the parent contract was created before the integration with Vertex.

• If delivery is not flagged, tax is calculated using the contract store’s address.

• If delivery is flagged, the address passed to the tax service is taken from the continuation contract being modified — not from the parent contract.

The delivery address can be updated while a continuation contract is open, and doing so changes the tax jurisdiction used for that period. Check the address on the continuation contract you are crediting, not only the parent.

Methods That Do Not Credit an Invoice

The following methods place a credit on the customer account. The credit can be applied against an invoice, but it is not linked to the invoice, so the invoice is not credited and the tax charged on it is not reversed. Do not use them to credit an invoice.

Modify Credit

Modify Credit places a credit on the customer account and is not linked to any invoice, so the tax charged on the invoice is not reversed. It is controlled by a security setting under System > Security > Transactions > Modify Credit. Modify Credit is documented in "Different Types of Credits," along with the other account credit methods.

Manually created credit contracts

Do not create a credit contract manually to credit an invoice. A manually created credit contract places a credit on the customer’s account that can be applied to anything; it does not credit a specific invoice, and the tax charged on that invoice is not reversed. Different Types of Credits also notes that manually creating a credit contract is not recommended, as it can easily be abused.

Account credits, credit memos, in-store credits, and overpayment credits

These are payment and account credit actions. They generate no tax call and leave the invoice’s tax unchanged. They are appropriate for holding a balance on a customer account for future use, but not for crediting an invoice.

To credit an invoice, whether a full invoice credit or a tax-only credit, modify the existing invoice as described above.