Manage U.S. Use Tax on Purchase Orders in Dynamics 365 Finance and Operations

By Natalie Pueschner | May 20, 2022

Picture 7

 

Managing sales tax requirements on your business purchase can be complicated, but Dynamics 365 Finance and Operations can help make it easier!

Your vendors are generally responsible for charging the correct amount of tax to you, however, if the vendor does not charge your business correctly, it is your responsibility to pay the tax. This is called Use Tax or assessing use tax.

We encourage all businesses to include sales tax expectations within the purchase order. This is accomplished by adding the proper item sales tax group to each line of the purchase order and the sales tax group to the purchase order header/line. The item sales tax group can be set up as a default on the item or procurement category. The sales tax group can be set up as a default on the vendor.

During the confirmation process, the purchase order will include an amount for expected sales tax:

Picture 1

Once the vendor invoice is received, the sales tax is expected to be included. If the vendor does not charge tax, consider the following approach:

  • Create a second sales tax group for the jurisdiction where use tax is being assessed (based on the delivery address, this is most likely the corporate office locations only). Indicate the group is used for use tax by checking the use tax box below

Note that this looks like a duplicate of an existing sales tax group.

Picture 2

The purchase order will be expecting sales tax to be included.

Picture 3

In this event, the vendor invoice does not include sales tax, the accounts payable clerk can adjust the sales tax group to the Use Tax group within the invoice posting process.

Picture 4

Changing the sales tax group to include sales tax allows you to post the vendor invoice at the amount owed to the vendor (excluding sales tax) and use tax liability assessed for the purchase.

You can then fill out your invoice totals.

Picture 5

Then add your posted sales tax.

Picture 6

Note if invoice total matching details are activated, the exclusion of sales tax from the invoice will result in a matching variance.

Picture 7

Your invoice can then still be posted by approving the variance.

Picture 8

Then your Voucher is now posted with use tax.

Picture 9

The example above has demonstrated an item purchase for a project, the approach is the same if using a procurement category and non-project purchase – see the Voucher example below.

Picture 10

Questions?

Reach out to us for help optimizing your software solutions!

Related Posts

Recommended Reading:

Performance Turning Webservices in Dynamics 365 Business Central: Migrate Your Integrations off SOAP and Move to OData or API

Dynamics 365 Business Central users will soon be unable to use SOAP web services when making application functionality available to […]

Read the Article

Stoneridge Software Selected for 2022 Microsoft US Partner Award – Dynamics 365 Business Central

Stoneridge Software is honored to be selected as a 2022 Microsoft US (MSUS) Partner Award winner for Dynamics 365 Business […]

Read the Article
6.29.22 Dynamics CRM

Reduce Manual Data & Increase Productivity with Dynamics 365 for Sales

Dynamics 365 for Sales has a ton of great features to help automate processes for you and your team to […]

Read the Article

Dynamics 365 Business Central Boolean Field Bug Temporary Fix

If you are a Dynamics 365 Business Central cloud (SaaS) customer who is using Edge or Chrome to run the […]

Read the Article

Using Non-Sequential Numbering to Prevent Locking In Your Dynamics 365 Business Central System

Running into locks in your system? Enable non-sequential numbering on your number series to prevent number series locking issues! As […]

Read the Article
6.24.22 Dynamics GP

Uncommonly Used Features: Setting Up Account Categories in Dynamics GP

This is the final part of my current series on Uncommonly Used Features in Dynamics GP. In this post, I […]

Read the Article

Increase User Productivity in Dynamics 365 Business Central with These 10 Tips

There are constantly evolving ways for you to increase user productivity in Dynamics 365 Business Central. Here are 10 tips […]

Read the Article

Star Tribune Lists Stoneridge as a Top 200 Workplace for 2022

Stoneridge Software’s emphasis on creating a positive and flexible culture has earned recognition as a top workplace in Minnesota. The […]

Read the Article
6.14.22 Dynamics GP

Uncommonly Used Features – Reconciling Sub-ledger to GL using the Reconcile Routines in Dynamics GP

As we continue the uncommonly used features series, with this post I want to show you how to reconcile your […]

Read the Article

Start the Conversation

It’s our mission to help clients win. We’d love to talk to you about the right business solutions to help you achieve your goals.

Subscribe To Our Blog

Sign up to get periodic updates on the latest posts.

Thank you for subscribing!

X