How to adjust sales tax on credit or debit memos

How to adjust sales tax on credit or debit memos.

 NOTE: Sage BusinessWorks includes a feature to calculate sales tax and sales tax reporting adjustments when posting credit memos. Debit memos must be adjusted manually in the 'Distribution' screen. 

Adjusting tax on credit memos:
If a credit memo is applied to a taxable invoice, click the 'Change credit amount' check box and the 'Calculate Tax' button to automatically redistribute the amount on which to calculate tax. Sage BusinessWorks calculates taxes on amounts distributed to sales accounts, charges, or freight. (Remember to reduce the 'Sales adjustments' amount by the values increased elsewhere in the 'Adjustment Distribution' screen.) There are two methods for calculating sales tax:

Method 1: The tax as a part of the amount entered
Leave the 'Change credit amount' check box unchecked and click the 'Calculate Tax' button. The amount distributed to the sales account, miscellaneous charge, or freight is reduced by the amount distributed to the tax. The balance in the 'Amount' field still equals the original amount entered.

Method 2: The tax as an addition to the amount entered
Check the 'Change credit amount' check box before clicking the 'Calculate Tax' button. The amount distributed to the sales account, miscellaneous charge, or freight remains unchanged. The new balance in the 'Amount' field equals the original amount entered plus the calculated tax.

Notes:
After clicking 'Calculate Tax', the message, "SALES TAX REPORTING HAS CHANGED" displays. Click 'OK' twice to return to the 'Credit Memo' screen. Click 'Tax Reporting' to review the taxable and nontaxable amount changes. For more information, see 400521 How to interpret A/R credit or debit memo sales tax reporting distribution.

The distribution amounts may not change after clicking the 'Calculate Tax' button for two reasons:

• The original invoice was not fully taxed. Unless all line items on an invoice were taxed, Sage BusinessWorks does not know how to calculate tax on the credit memo.
• The credit memo was not distributed to a category on which Sage BusinessWorks calculates sales tax. Sage BusinessWorks calculates sales tax on amounts distributed to sales accounts, charges, or freight only.

Adjusting tax on debit memos:
To increase the balance on a taxable invoice, create the debit memo for the sum of the sales and sales tax increase.

1. Select A/R, Transactions, Debit Memos and select the customer.
2. Apply the debit memo to 'Invoices' and select the invoice.
3. Enter the sum of the sales and sales tax increase and click 'Distribution'.
4. Adjust the distribution as needed. Enter the tax amount for the increase and either adjust or zero out the 'Sales adjustments' field.
5. Click 'OK'. The message, "SALES TAX REPORTING HAS CHANGED" displays. Click 'OK'
6. On the 'Debit Memos' screen, click 'Tax Reporting'. Sage BusinessWorks calculates the 'Taxable' amount by multiplying the amount distributed to the tax by the tax rate in A/R, Utilities, Sales Taxes, Maintain. For more information, see 'How to interpret A/R credit or debit memo sales tax reporting distribution' in the Related Resources section.
7. Click 'OK' and 'Post' to complete the transaction.

 

The table below explains how the numbers on the Tax Reporting screen are calculated:

 

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