Managing tax information with Microsoft Dynamics RMS
With Microsoft Dynamics™ Retail Management System (RMS), you can collect the sales taxes that are due to each of the tax agencies you must report to, and then generate built-in reports that can help you with your returns. You can assess taxes on a per-item basis or on a per-customer basis, and Microsoft Dynamics RMS includes support for both tax-exclusive and tax-inclusive (VAT) systems.
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Useful terminology
| • | Customer field for tax matching – The specific information about a customer that is used to determine the tax rate to apply to a transaction. |
| • | Customer tax – A collection of sales taxes that is applied to customers based on specific customer information, such as the state where they live. In Microsoft Dynamics RMS, customer taxes are used when the merchant is required to collect destination-based taxes. |
| • | Default item tax group – The sales tax that is automatically assigned to a newly created item. This setting is only available when the store is using item-based taxes. It is particularly useful when most of the items in the store are subject to the same taxes. The sales tax for a particular item can be changed at any time. |
| • | Destination-based taxes – Taxes that are determined based on the shipping address associated with a sale. |
| • | Item tax – A collection of sales taxes that is applied to specific items. |
| • | Partial dollar method – A method of calculating the taxes on part of a dollar (or other unit of currency) when a tax agency does not use straight tax percentages for partial dollars. |
| • | Sales tax – A tax assessed by a particular tax agency and the rules by which the tax is applied to transactions. |
| • | Tax agency – A governing body that assesses taxes on retail transactions. |
| • | Tax rate – The tax amount charged by a tax agency, either as a percentage, a fixed amount, or both. |
| • | Tax-exclusive system – A method of taxation where the tax amount for an item is not included in its sales price. |
| • | Tax-inclusive system – A method of taxation where the tax amount for an item is included in its sales price. |
| • | Value Added Tax (VAT) – A tax-inclusive tax system that is widely used in Europe. |
| • | Walk-in customer tax group – The sales tax that is applied when (1) a customer is not added to a transaction, or (2) the field for tax matching for the customer does not match any customer tax code. This setting is only available when the store is using customer-based taxes. |
Choosing between item taxes and customer taxes
Microsoft Dynamics RMS offers two ways of collecting taxes: on a per-item basis or on a per-customer basis.
With item taxes, tax rates are based on the type of item being sold. For example, a state might charge different tax rates for food items and nonfood items, with an additional tax levied against items like cigarettes and alcohol.
With customer taxes, tax rates are determined by who the customer is, where the customer lives, or where the purchased items are being shipped. For example, a store might be required to collect destination-based taxes, taxes that are based on the address where the items in the transaction are being shipped. If you think customer taxes are right for your store, see “Setting up customers for customer taxes” later in this article.
To set up the store for item taxes
1. | On the File menu in Store Operations Manager, click Configuration. |
2. | On the Sales Tax tab, under Tax Schedule Basis, select Assign tax schedules on a per item basis. |
3. | In the Default item tax group box, select the sales tax that should be assigned by default to newly created items. |
4. | Click OK, and then restart Store Operations POS on all registers. |
To set up the store for customer taxes
1. | On the File menu in Store Operations Manager, click Configuration. |
2. | On the Sales Tax tab, under Tax Schedule Basis, select Assign tax schedules on a per customer basis. |
3. | In the Walk-in customer tax group box, select the sales tax that should be applied to a transaction where (1) a customer is not added, or (2) the field for tax matching for the customer does not match any customer tax code. |
4. | In the Customer field for tax matching box, select the customer information that should be used to determine which tax to apply. For example, if you select “City”, Store Operations will look for a customer tax code that matches the city in the customer’s address. If no match is found, the walk-in customer sales tax will be used. |
5. | Click OK, and then restart Store Operations POS on all registers. |
Setting up for VAT
Microsoft Dynamics RMS is designed to work with both tax-inclusive and tax-exclusive systems. A tax-inclusive system is one where the sales tax on an item is included in the item’s sale price. Europe’s Value Added Tax (VAT) system is one example of a tax-inclusive system. A tax-exclusive system is one where the sales tax on an item is not included in the item’s sale price. Most stores in Canada and the United States use a tax-exclusive system.
To set up the store for a tax-exclusive system
1. | On the File menu in Store Operations Manager, click Configuration. |
2. | On the Sales Tax tab, select Tax-Exclusive (United States, Canada). |
3. | Click OK, and then restart Store Operations POS on each register. |
To set up the store for a tax-inclusive system such as VAT
1. | On the File menu in Store Operations Manager, click Configuration. |
2. | On the Sales Tax tab, select Value Added Tax (VAT) or Tax-Inclusive (Europe). |
3. | If you are using a tax-inclusive system in order to collect VAT, type the VAT registration number (usually required) and the VAT detail ID. |
4. | Click OK, and then restart Store Operations POS on each register. |
Creating or modifying a sales tax
Before you can set up the item or customer taxes for the store, you need to define the tax rates and rules that will be included in the taxes. In most cases, you will need one sales tax per tax agency, such as City or State. You will need more than one sales tax per tax agency if the tax agency assesses different tax rates for different items.
Use the available sales tax settings in combination to handle most tax requirements. Update your sales taxes regularly to reflect changes in the assessed tax rates.
To create or modify a sales tax
1. | On the Database menu in Store Operations Manager, click Sales Taxes. |
2. | Double-click the sales tax that you want to modify, or click New to create a new sales tax. |
3. | Type a unique description and code for the sales tax. |
4. | If the tax rate only applies to a certain portion of the sales price, type the appropriate values into the Minimum taxable amount and Maximum taxable amount boxes. For example, if an item is not taxable unless it is priced at 25 dollars or more, you would type $25.00 into the Minimum taxable amount box. |
5. | If the sales tax is computed as a percentage of the sales price, type the percentage in the Sales Tax Rate box. |
6. | If the sales tax is a fixed amount regardless of the sales price, type the amount in the Fixed Amount box. |
7. | If you specified a minimum taxable amount and the tax should not be applied to the portion of the sales price that is less than that amount, select the Only apply tax to portion over minimum taxable amount check box. |
8. | If other sales taxes applied to the item should be taxed at this rate, select the Include any previous sales taxes in calculation check box. |
9. | If the tax agency assesses tax amounts on partial dollars (or other units of currency) that are slightly different from the straight percentage amount, enter the tax amounts in the Partial dollar table. For more information, see “Sample partial dollar table” in the next section. |
10. | Click OK, and then run a Z report on each register. |
Sample partial dollar table
The following table shows an example of a partial dollar table. This example is for a modified 10% tax rate. It shows tax amounts that would be charged for amounts under $1.00. With this partial dollar table in place, an item priced at $10.82 would be taxed at $1.09 instead of the $1.08 that you might otherwise expect. That is, the customer would pay tax of $1.00 for the whole-dollar portion of the price and $0.09 for the partial-dollar amount between $0.80 and the upper bracket of $0.90.
Upper Bracket | Sales Tax |
$0.00 | $0.00 |
$0.10 | $0.01 |
$0.20 | $0.02 |
$0.30 | $0.03 |
$0.40 | $0.04 |
$0.50 | $0.05 |
$0.60 | $0.06 |
$0.70 | $0.07 |
$0.80 | $0.08 |
$0.90 | $0.09 |
$1.00 | $0.10 |
Creating or modifying an item tax
Once the store has been set up for item taxes and the store’s sales taxes have been created, you can set up the item taxes for the store. Each item tax contains between one and ten sales taxes that determine the total tax rate collected under the item tax.
To create or modify an item tax
1. | On the Database menu in Store Operations Manager, click Item Taxes. Note
If the Item Taxes command is not available, you must first set up the store for item taxes. |
2. | Double-click the item tax that you want to modify, or click New to create a new item tax. |
3. | Type a unique description and code for the item tax. |
4. | If the tax should be applied to the profit on the item rather than the full sales price, select the Compute tax on (Price – Cost) instead of Price check box. |
5. | In the order in which the included tax rates should be applied, select the sales taxes that are included in this item tax. |
6. | For each sales tax that should be listed on transaction receipts, select the Receipt check box. |
7. | Click OK, and then restart Store Operations POS on each register. |
To assign an item tax to an item
1. | On the Database menu in Store Operations Manager, click Items. |
2. | Double-click the item that you want to modify. |
3. | In the Item tax box, select the item tax that is appropriate for this item. To make the item nontaxable, select <none>. Note
If the Item tax box is not available, you must first set up the store for item taxes. |
4. | Click OK. |
Creating or modifying a customer tax
Once the store has been set up for customer taxes and the store’s sales taxes have been created, you can set up the customer taxes for the store. Each customer tax contains one or more sales taxes that determine the total tax rate collected under the item tax.
To create or modify a customer tax
1. | On the Database menu in Store Operations Manager, click Customer Taxes. Note
If the Customer Taxes command is not available, you must first set up the store for customer taxes. |
2. | Double-click the customer tax that you want to modify, or click New to create a new customer tax. |
3. | Type a unique description and code for the customer tax. IMPORTANT! The code for the customer tax must exactly match the text that will appear in the customer field that is used for tax matching. For example, if the customer taxes are based on the city in the customer’s address, the code for the customer tax must exactly match the city name. Employees should be encouraged to check their typing carefully. |
4. | If the tax should be applied to the profit on the items in the transaction rather than the full sales price, select the Compute tax on (Price – Cost) instead of Price check box. |
5. | In the order in which the included tax rates should be applied, select the sales taxes that are included in this customer tax. |
6. | For each sales tax that should be listed on transaction receipts, select the Receipt check box. |
7. | Click OK, and then restart Store Operations POS on each register. |
To mark an item as taxable or not taxable
1. | On the Database menu in Store Operations Manager, click Items. |
2. | Double-click the item that you want to modify. |
3. | Select or clear the Item is taxable check box, as appropriate. Note
If the Item is taxable check box is not available, you must first set up the store for customer taxes. |
4. | Click OK. |
Setting up customers for customer taxes
When your store is set up to use customer taxes, properly maintained customer records are a necessity. After all, if a customer’s information is out of date, the correct taxes will not be applied to that customer’s sales transactions.
Decide what customer information will be used to determine tax rates. In most cases, this will be the city or state where the customer lives or has goods delivered, but you can choose any of these customer fields:
| • | City |
| • | State |
| • | Zip or postal code |
| • | Country or region |
| • | Ship-to city, state, zip or postal code, or country or region |
| • | Any of the custom customer text fields |
To set up the custom customer text fields
1. | On the File menu in Store Operations Manager, click Configuration. |
2. | Click Captions. |
3. | On the Customer tab, under Text Fields, type the names of the custom fields that you want to use, and then click OK. |
To choose the customer field to use for tax calculations
1. | On the File menu in Store Operations Manager, click Configuration. |
2. | On the Sales Tax tab, under Tax Schedule Basis, in the Customer field for tax matching box, select the name of the field that you want to use for tax calculations. |
3. | Click OK. |
To modify a customer’s address, shipping address, or custom fields
1. | On the Database menu in Store Operations Manager, click Customers. |
2. | Double-click the customer that you want to modify. |
3. | On the Billing Information tab, make changes as needed to the customer’s billing address. |
4. | On the Shipping Address tab, double-click the shipping address that you want to modify, make changes as needed, and then click OK. |
5. | On the Additional tab, change the information in any of the custom fields that the store uses. Only text custom fields can be used for tax matching. |
6. | Click OK. |
Tax-exempt customers
Regardless of the tax basis for your store, there will be certain customers from whom you should not collect tax. For example, if you sell to customers in certain ethnic groups that are not taxed, or if you sell to customers for resale, you would want to mark those individuals as tax exempt.
To mark a customer as tax exempt
1. | On the Database menu in Store Operations Manager, click Customers. |
2. | Double-click the customer that you want to modify. |
3. | On the Customer Options tab, select the Customer is exempt from taxes check box. |
4. | Click OK. |
Tax reports
Microsoft Dynamics RMS includes a number of reports that contain tax information. Brief descriptions of the information contained in these reports are provided in the table below.
Report | Tax Information | Location in Store Operations Manager |
Customer List | Customers’ tax-exempt status
For customer taxes, the customers that belong to each tax group | Reports > Customer > List |
Daily Sales Tax Collected | A summary of the tax amounts collected for each sales tax, for the specified date | Reports > Sales > Summary Tax Collected (Daily) |
Detailed Sales | Reason codes for tax changes made at the register | Reports > Sales > Detailed Sales |
Sales Tax Collected | Tax amounts collected in each transaction for each sales tax, for the specified date range | Reports > Sales > Detailed Tax Collected |
Sales Tax Analysis | Total sales figures for transactions where sales taxes were applied, with subtotals for taxable, nontaxable, and tax-exempt sales | Reports > Sales > Sales Tax Analysis |
Sales by Region | Total sales figures for each region (useful for destination-based tax calculations) | Reports > Sales > Regional Sales |
Department Sales (Tax Included in Sales) | Total sales figures for each department, with both tax-inclusive and tax-exclusive sales figures shown | Reports > Sales > Department Cost/Sales (Tax-Inclusive) |
Back Order (Summary) | Tax amounts per back order | Reports > Quotes/Orders > Back Orders – Summary |
Back Order (Detailed) | Reason codes for tax changes on back orders | Reports > Quotes/Orders > Back Orders – Detailed |
Quote (Summary) | Tax amounts per quote | Reports > Quotes/Orders > Quotes – Summary |
Quote (Detailed) | Reason codes for tax changes on quotes | Reports > Quotes/Orders > Back Orders – Detailed |
Purchase Order List | Tax amounts per purchase order | Reports > Quotes/Orders > Purchase Orders |
Inventory Transfer In List | Tax amounts per inventory transfer in | Reports > Quotes/Orders > Inventory Transfer In |
Inventory Transfer Out List | Tax amounts per inventory transfer out | Reports > Quotes/Orders > Inventory Transfer Out |
Work Order (Summary) | Tax amounts per work order | Reports > Quotes/Orders > Work Orders – Summary |
Work Order (Detailed) | Reason codes for tax changes on work orders | Reports > Quotes/Orders > Work Orders – Detailed |
Layaway (Summary) | Tax amounts per layaway | Reports > Layaway > Layaways – Summary |
Layaway (Detailed) | Reason codes for tax changes on layaways | Reports > Layaway > Layaway – Detailed |
Register Analysis | Summary tax data for batches closed on the specified date | Utilities > Crystal Reports > Register Analysis Report |
Tracking taxes paid to suppliers
With Microsoft Dynamics RMS, you can specify the tax rate charged by each of your suppliers, and then use the Purchase Order List report to view totals information for each supplier.
To specify the tax rate for each of a supplier’s items
1. | On the Database menu in Store Operations Manager, click Suppliers. |
2. | Double-click the supplier that you want to modify. |
3. | On the Items Supplied tab, in the Tax Rate column, type the tax rate for each item. |
4. | Click OK. |
To change the tax rates in a purchase order
1. | On the Inventory menu in Store Operations Manager, click Purchase Orders. |
2. | Double-click the purchase order that you want to modify. |
3. | On the Contents tab, in the Tax Rate column, type the tax rate for each item. |
4. | Click OK. |
To automatically update supplier tax rates when goods are received
1. | On the File menu in Store Operations Manager, click Configuration. |
2. | On the Options tab, click the Purchase Order options folder. |
3. | Select the Update supplier cost and tax rate from Purchase Order check box. |
4. | Click OK. |
To view summary tax information in the Purchase Order List report
1. | On the Reports menu in Store Operations Manager, point to Quotes/Orders, and then click Purchase Orders. |
2. | If you want to include closed purchase orders in the report, select the Status <> Closed filter, and then click Remove. |
3. | Specify any other filters you want, and then click OK to generate the report. |
4. | Drag the Supplier column to the far left of the report. |
5. | On the toolbar, click the Select columns to group button. Totals information for each supplier, including the total taxes on purchase orders sent to the supplier, will be added to the report. |
Applying or modifying taxes at the point of sale
At the point of sale, cashiers who have the “Allowed to change tax status” cashier right can apply or clear sales taxes for all items in the transaction or for specific line items. If you want, you can prevent certain employees from making tax changes, or you can prompt or require employees to specify a reason for the tax changes they apply.
For information about setting up reason codes, see “Creating reason codes” in Store Operations Online Help.
To prevent a cashier from making tax changes
1. | On the Database menu in Store Operations Manager, click Cashiers. |
2. | Double-click the cashier that you want to modify. |
3. | Under Security, clear the Allowed to change tax status check box. |
4. | Click OK. |
To prompt or require cashiers to specify a reason for tax changes
1. | On the File menu in Store Operations Manager, click Configuration. |
2. | On the Options tab, click the Reason Code options folder. |
3. | Select the Prompt for reason code on tax changes or Reason code required on tax change check box, as appropriate. |
4. | Click OK, and then restart Store Operations POS on each register. |
To toggle taxes on and off for an entire transaction
| • | In Store Operations POS, press SHIFT+F5 (No Tax). Note
Items added after you turn taxes off will not be taxed. |
To toggle taxes on and off for a specific line item
| • | Select the line item, and then press CTRL+F5 (Toggle Tax). Note
You can also select or clear the Tax check box for the line item. |
To apply a specific item tax to a line item
1. | Using the mouse or the arrow keys on the keyboard, highlight the Tax check box for the line item that you want to modify. |
2. | Press F2 (Lookup). |
3. | Select the item tax that you want to apply to the line item, or select <none> to clear the item tax, and then click OK. Note
Remember that each of your sales taxes can be included in more than one item tax. You should be able to set up a variety of item taxes to help you address special cases. |
To apply or clear specific sales taxes on a transaction
1. | Press SHIFT+F12 (Taxes). |
2. | Select the check boxes for the sales taxes that should be applied to this transaction, and clear the check boxes for the sales taxes that should not. |
3. | Click OK. Note
After you select the sales taxes to apply to a transaction, these taxes will be applied to additional items added to the transaction, provided the new items are subject to the applied sales taxes. |
