Automatic Tax Calculation in Payables

If we enable the Automatic Tax Calculation feature, Payables will automatically calculate invoice sales tax and create Tax type disribuitons. Payables automatically calculates tax for manually entered invoices and recurring invoices. During Expense Report Import, Payables also automatically calculates tax for invoices it creates. We enable the Automatic Tax Calculation feature by enabling the Use Automatic Tax Calculation Payables option.

Navigaiton
Payables - Setup->Options->Payables and select Invoice Tax tab.

Check the Use Automatic Tax Calculation.

If we do not enable Automatic Tax Calculation, Payables does no tax calculation, but it will automatically create a tax distribution during invoice entry if we enter values for tax codes and tax amount in the invoice window. Payables copies the invoice tax code and tax amount values we enter when it creates the tax distribution but it does no tax calculation. However it will validate the tax amount during invoice validation.

Automatic Tax Calculation Levels
If we use automatic tax calculation, Payables calculates tax for invoices at the level we specify. ie Header, Line or Tax Code. The calculation level option we select determines whether Payables calculates tax based on the invoice information (Header), or based on individual invoice distribution information (line and tax code). The difference between Line and Tax Code calculation is how Payables groups amounts to calculate tax. The difference in calculation is generally due to rounding differences.

The value of the Calculation level option defaults in the following order
Payables Options Window -> Suppliers Window-> Supplier Sites Window-> Invoice Entry.
**** (We cannot set a value at the Suppliers window if we use Multi Org Support). We can override the calculation level at any level (supplier, supplier site, invoice entry) if the Allow calculation level override check box is enabled.

To check the All Calculation Level Override
Navigation
Payables-> Setup->Options->Payables and Select Invoice Tax tab.

If we override the calculation level we can change the calculation level to Header, Line or Tax Code or we can disable tax calculation by choosing none.

We choose the automatic tax calculation level in the calculation level fields of the invoice tax regions of the Payables Options, Suppliers, and Suppliers sites windows.

We can use Header Level calculation only if the tax code is fully recoverable. If the transaction uses tax codes that are nonrecoverable or partially recoverable, we must choose line or tax code level calculation.

Header
If we automatically calculate tax at the Header level, then during invoice entry in the Invoice Workbench, when we enter a tax group or Sales or User defined tax code in the Invoices window, Payables automatically calculates and enters the tax amount. Payables calculates the tax amount based on the gross invoice amount and the tax rate of the tax codes we use. In the tax codes window we assign a tax rate to each tax code.

Line
If we automatically calculates tax at the Line Level, after we enter non tax (item, miscellaneous, or freight type) distribution in the distribution window, Payables creates tax type distribution. When we enter distributions, we use the Includes Tax Check Box to indicate if a distribution line amount is inclusive or exclusive of tax.
Payables calculates the tax amount for distributions based on the distribution amount, the Includes tax check box for the distribution and the tax rate of the applicable tax codes.

Tax Code
Tax code and line level calculation are the same except for how Payables groups and rounds tax amounts.

None
If we choose as the calculation level, Payables disables automatic tax calculation for associated invoices. In the Suppliers window, the supplier sites window, and during invoice entry, we can choose None as our calculation level if have enabled the Allow Calculation level override option.