Overview of Tax Profiles

aACE provides thorough, flexible control over tax calculations. This robust control is created by the interaction of aACE "tax profiles", plus postal codes and client company information. These elements enable you to calculate, collect, and store taxes until it's time to remit them.

If your company needs even greater sophistication for tax handling, the aACE+ AvaTax integration provides advanced tax support.

Tax Profiles

Tax profiles are the hub for tax calculations in aACE. They are typically focused on a jurisdiction and should be based on postal codes. They can also be used for different dates and different types of taxes (e.g. NY2019, NY2020, Use Tax, etc). You can create as many tax profiles as needed. 

The tax profile applied for a specific transaction is determined either by 1) the postal code of the shipping destination or 2) the tax profile linked to the customer's company record. This allows you to flag and document organizations with tax exempt status.

Each tax profile supports up to four taxing entities (e.g. state, city, county, etc). For each entity, you can specify the GL Account where the tax monies should be collected and specify rates for the four general types of line item codes. You can also record exceptions to the default rates for certain LICs by entering unique tax rates. 

The tax profile comes into play when a line item code is selected in an order. The tax rates are identified and tax amounts are calculated. When the order is invoiced, the tax amounts are posted against the corresponding GL accounts.

Screen Overview

To work with the Tax Profiles module, navigate to Menu > Accounting > Tax Profiles. In a tax profile record, the two uppermost fields are required:

  • Tax Profile Title — Enter a meaningful name (e.g. "In State" or "Out of State" or "Ohio").
  • Abbreviation — Enter a short, unique code; users will be able to type this code in drop-down lists to select the profile.

1. General Info

Mark all the correct flags to indicate whether the tax profile should be the system's default, whether it calculates use tax amounts, whether it addresses European Union taxation, and whether it should be used with your aACE+ AvaTax integration.

The Start Date and End Date are optional. If you know that a tax rate is going to be changing effective January 1st, you can set the End Date on the current tax profile to December 31st. This will trigger an automatic notification reminding you that the profile is expiring.

In the Description field, you can comment further on details of the tax profile.

2. Tax Setup

List each taxing authority that will share in the total tax value and assign each one to a General Ledger account. These accounts act as the holding buckets for the amounts you collect as you process order payments. When an invoice is opened, the tax amount calculated for each entity is posted to the specified GL Account.

3. Default Rates

The Tax Setup labels system are automatically transferred to become column headers for the Default Rates section. Check with your taxing authorities for actual rates and enter the percentage each entity will receive of the total tax collected under this profile. aACE uses these rates to calculate the final tax amounts.

Each line item type can be taxed at different rates (e.g. a service may be taxed at a different rate than a tangible item). Also, each line item type can have a different tax rate for each taxing entity. Note: "Other" type line item codes are generally not taxed.

4. Exceptions

In the Line Item Code field, select any specific items that do not conform to the default rates entered above. Exceptions can carry their own rates or can be completely exempt. 

You can add LICs to multiple tax profiles at one time. From the list view, use the Quick Search bar to locate all the tax profiles that should have the same LICs included as exceptions. Click Actions > Add Exceptions to Tax Profiles in List. At the confirmation dialog, click Add, and at the selector dialog locate and select the LICs, then click Save. You can also remove LIC exceptions this way.