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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, full invoice credits, and modify credits while maintaining compliance with tax exemptions and accurate tax calculations based on delivery flags and addresses. Additionally, it outlines the steps to create a credit contract, including security settings, inventory adjustments, and refund options.
Topics included in this article
Closed Accrual Accounting
Tax-Only Credits
Full Invoice Credits
Modifying Closed Contracts
Tax Calculation and Delivery Flags
Continuation Billed Contracts
Modify Credit
Creating a Credit Contract
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.
| It is important that no modifications are made to the Customer or products related to tax exemptions. To get accurate credits, all sales tax codes/classes (exemptions) need to remain the same as they were when the original contract was closed. |
Tax-Only Credits
Crediting tax only off a contract: Select modify the contract 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.
Full Invoice Credits
To fully credit an invoice, zero out the price on each line item so that the total of the contract is $0.00, then close out of the contract. This will create a credit for the exact amount of the invoice.
The original contract will have a call log that pops up 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 delivery flag on a contract. 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 for 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
Credits created for continuation-billed contracts will always look back at the very first contract (parent) to determine the delivery flag and delivery address, so the tax will be calculated correctly.
This applies even if the original contract was prior to the integration with Vertex.
Modify Credit
Another way to give a customer credit on a closed contract is through what we refer to as a Modify Credit.
There is a security setting that allows users to perform this action. It is under System > Security > Transactions > Modify Credit.
Creating a Credit Contract
To create the credit, navigate to Transactions -> Modify Contract. For the Contract No, you will type in “Credit”. You will then be prompted to select a customer and the Inventory. You will want to select all inventory items you are crediting to the customer; the quantity and pricing can be added when adding the items to the credit, or they can be adjusted after being added to the credit contract. You will be prompted if it is the return of a sold item, which, if you answer yes, will add the item back into your inventory. Once you finish adding items you will be taken to a credit contract, at this point you will not be able to add any additional inventory items. On the credit contract, you will want to add notes and contract details.
If the contract was for delivery, we recommend checking the delivery box and adding the delivery address to the contract, so that Vertex will calculate the correct tax jurisdiction.
When saving the credit contract, you can choose to refund the customer directly from the contract or create an in-store credit to apply to a contract.