Sales and Use Tax Guide

PENTA for Windows

Reference Manual

PENTA’s sales and use tax function eliminates the time-consuming task of calculating taxes manually. Its primary purpose is to provide a central source for you to efficiently build and maintain tax rates and jurisdictions. You have the flexibility to set up and customize tax information to suit your environment. Once you enter this information, PENTA automatically uses it to calculate taxes and presents the results in a variety of formats—on screen and in reports.

The sales and use tax function is not contained in a single module. You will notice its effects throughout PENTA, most significantly in the Accounts Payable, Financial and Accounting, Job Management, and Inventory modules.

PENTA’s sales and use tax function:

• Enables you more accurately to calculate tax liabilities.

• Saves you the time required to identify information on invoices and billings to customers.

• Provides data on windows and reports that improves information available for sales tax audits.

• Provides considerable flexibility for tracking tax within projects.

• Automatically creates open payables for tax liabilities.

• Provides sales and use tax reports that detail taxable and exempt transactions, in addition to associated tax amounts by jurisdiction.

The Sales and Use Tax Guide contains procedures for setting up and applying sales and use tax in PENTA. This Guide is for experienced PENTA users who need instructions for using the sales and use tax feature.

For each job and Cost Type, you can define a set of Job Cost Code tax rules. While you could enter each set separately, it is much faster to use a master template and apply it to multiple Jobs. In the previous Setup section, you created a master template for Costcode tax rules from which you can quickly build other sets of rules.

Use the Costcode Tax Rule Maintenance window to maintain a link between a set of Job/Cost Types and Costcodes—those to which you are charging committed cost and those to which you are charging the tax. This enables you to separate the tax portion of Job costs.

Purchase Orders and accounts payable invoicing use the defined tax rules to apply the tax to job costs. The rule may define such things as:

• Taxable or tax exempt.

• Taxable percent.

• Tax jurisdictions, where applicable.

• The Costcode where the expense will apply.

Guidelines for entering/changing information:

• PENTA validates the length and type of information in a Costcode field.

• PENTA does not validate the information you enter in a Costcode field if it contains the wildcard character (i.e., an underscore).

• Enter rules from the most specific to the most general.

• PENTA tries to match in sequence order (low to high). PENTA first selects those that match without the use of a wildcard.

Project Management > Jobs > Costcode Tax Rule Maintenance

1. Use Job Id to enter the unique code you entered on the Master tab to identify this job.

2. Use Cost Type Code to identify a type of costs within your Costcodes such as labor, materials, and subcontract work.

3. If you want to copy a template, click the Copy Tax Rules button
   PENTA launches the Copy Costcode Tax Rule Template pop-up window.

4. Enter the Id of the Tax Template you want to copy from.

5. Enter the Id of the Job or Cost Type you want to copy from.

6. Click the Copy Tax Rules button.

7. Use Seq # to identify the point in the sequence at which PENTA should apply taxes for the Costcode(s). Each sequence number contains information for the application of tax, percentage taxable, distribution of the tax amount to another Cost Type/Costcode.

8. Use Costcode to associate costs on your job.
   You can enter Costcode masks in this field to include a range of Costcodes. The only valid wildcard character is an underscore (_).
   PENTA displays the description of the Costcode giving up the tax liability. PENTA displays this only if a wildcard does not exist and if the Costcode is for a job or a standard Costcode.
   PENTA displays the description of the Costcode to which you are assigning the tax liability. This displays only if a wildcard does not exist and if the Costcode is for a job or a standard Costcode.

9. Optionally use Tax Exempt Reason Code to enter the reason why a transaction is exempt.

10. Use Taxable Percentage to enter the percentage of the taxable activity.

11. Optionally use Apply Tax to Job to transfer the tax liability from one job to another.

12. Optionally use Apply Tax to CT to transfer the tax liability from one Cost Type to another.

13. Optionally use Apply Tax to Costcode to transfer the tax liability from one Costcode to another.

14. Define a Costcode or range of Costcodes using a wildcard character. The only valid wildcard character is an underscore (_).

15. Use Direct Pay Tax to indicate whether PENTA always accrues the tax liability, and you are responsible for paying the tax authority directly. The default is from the job.

16. Optionally use the Tax Jurisdiction List pop-up window to view the tax jurisdiction values.
    These are either the defaults or the overrides for the current Costcode. For more information about the tax jurisdiction window, refer to the Tax Jurisdiction Window section.

Use the Tax Certificate pop-up window to enter a tax certificate for the current Costcode.

Project Management > Jobs > Costcode Tax Rule Maintenance > Tax Cert button

1. Enter a tax certificate for the current Costcode.

2. Close the window to commit your changes.

You can now create a transaction with a job distribution. PENTA will apply the tax liability to the appropriate Costcode.

After completing this Step, you have created a list of associated taxing authorities that apply to the purchase of goods or services.

PENTA maintains the tax jurisdiction lists at the purchase order line item level. The tax jurisdiction list used/displayed is the one in effect for the ultimate destination point (warehouse or purchase order line item override).

To be consistent with the non-inventory line items, PENTA inserts a tax line to centralize the taxes. PENTA applies applicable tax distributions associated with jurisdictions to the warehouse’s Tax Accrual Account.

If the purchase order’s line item is for:

• Delivery to a warehouse, PENTA calculates the tax liability using the tax jurisdiction overrides or the defaults of the warehouse that were in effect as of the invoice date. You can override the information; however, PENTA does not apply the changes to the warehouse tax jurisdiction list, the changes are overrides.

• Direct shipment, the entire purchase order is tax exempt because the purchased items are strictly for resale. PENTA applies any taxes through the sales order.

Purchasing > Purchase Orders > Master tab

1. Identify the Purchase Order whose taxable information you want to define.
   Either query an existing Purchase Order or create a new one.

2. Optionally use the Taxable (Y/N) field to override the tax status of all line items—for inventory and non-inventory purchase orders. Available values are:

• Blank – For non-inventory purchase orders, the tax status of each distribution level determines what is taxable and what is tax exempt. For inventory purchase orders, PENTA uses the warehouse and product tax status to determine the tax status of each line item.

• Y – The whole purchase order is taxable. For each line item, PENTA uses the applicable tax jurisdictions and rates to calculate the taxes.

• N – The whole purchase order is tax exempt. PENTA considers all lines items taxable. If you enter this, click the Tax Info button.

1. In the Tax Information pop-up window, use Tax Exempt Reason Cd to indicate why. PENTA then displays the following values:

• Total PO Tax Amount – The sum of all tax lines.

• Line # – The tax line (first line identified on the Parameter window).

• Description –The tax line’s description.

• Amount – The tax amount.