Calculating Sales Tax using TaxJar

Configuration Process Entering an order Shipping an order Auto filing state taxes FAQ & Diagnostic Tips Related Pages

DEACOM's integration with TaxJar allows companies to automate sales tax calculations, reporting, and filings. The process involves the calculation of sales taxes at the time of order entry and again at the time of order shipment, to update any rates which may have changed. Taxes are recorded in TaxJar automatically at the time of shipment based on the Ship-to address, provided there is a state nexus added in the TaxJar application and the order being shipped has a tax order line that is TaxJar-generated at time of order entry or via the Sales > Re-Price function. Users can then file taxes automatically by logging into the TaxJar application, verifying the information, and completing the necessary steps. The process saves companies time and ensures greater accuracy when calculating sales taxes. In addition, companies no longer have to maintain sales tax rate information in DEACOM since this is now be handled via the TaxJar application. The calculation of sales taxes via TaxJar is available when orders are entered and shipped in the main application, the DEACOM Point of Sale application, via EDI, and in the DEACOM eCommerce offering.

Additionally, different product categories (supplements, alcohol, food, general merchandise, etc.) may be taxed at different rates when using TaxJar by configuring the necessary Tax Exemption Groups. Once a Sales Order line is added for a taxable item, one line will be added to the order for the total sales tax amount based on the applicable rates. This is different from DEACOM's inherent tax lines that list State, County, etc. taxes separately. Keep in mind that when using TaxJar, the Accounting Reporting "Sales Tax" report will no longer serve a purpose. The TaxJar application will replace this functionality.

TaxJar functionality is only available in web based versions of DEACOM.

Configuration

Prior to using TaxJar with DEACOM, the following steps must be completed:

• Customers must create an account with TaxJar via https://www.taxjar.com/?rfsn=835158.bec19
• Items will need to be set up with the "Saleable" flag checked on the "Properties" tab of the Item Master record in DEACOM.
• The following fields must be populated or checked via System > Maintenance > API Profiles.
  • "TaxJar API Key" field on the "Security" tab. This key is provided by TaxJar when users create an account.
    • Note: This key is encrypted in DEACOM using AES256 encryption.
  • The "Tax Line Name" field on the "Security" tab. This field must contain a valid name, such as "Sales Tax", which represents the name that will appear on order lines when taxes are added by TaxJar.
  • The "Tax API Type" field on the "Security" tab must be set to "TaxJar." This setting tells the DEACOM system to validate addresses during sales order shipment and apply the appropriate sales taxes.
  • The "Sales Tax Account" on the "Accounts" tab must contain a valid liability account.
• Facilities and Ship-to records in DEACOM must contain valid addresses including a two-character country code and valid zip codes. The TaxJar application specifically requires a valid country(two-characters), state, and zip code on the Ship-to and Facility records used on the sales order. Users should always include a valid street address.
• The appropriate Nexus entries must be setup in TaxJar in order to calculate sales taxes for shipments between states. Additional information on TaxJar and Nexus entries is available via https://blog.taxjar.com/sales-tax-nexus-definition Once the appropriate Nexus entries are created, you may ship from any facility in one state to locations and customers in another provided the correct Nexus entries have been created.
• The following security settings, relating to tax, should be turned off for all users and user groups, to prevent confusion about what data is needed or useful.
  • Accounting – edit tax exemption group
  • Accounting – edit tax region
  • Accounting – sales tax
  • Bill-to Companies – edit sales tax
  • Sales orders – change tax region

Process

The process involves the calculation of sales taxes at the time of order entry and again at the time of order shipment, to update any rates which may have changed.

Entering an order

The process below details how sales tax lines and amounts are added to sales orders in DEACOM when utilizing the TaxJar integration. The steps are not meant to cover the full sales order entry process in DEACOM which is covered via the Entering Sales Orders page.

1. Navigate to Sales > Order Entry.
2. Select the appropriate Customer. Note that the default Ship-to Company and numerous other header fields will be automatically populated after selecting a Bill-to Company, but can be overridden by the user, as long as the required security permissions are set to Yes.
3. Ensure the "Order Type" field is set to "Sales Order.
4. Enter any necessary sales order header information.
5. Click the "Add" button to add to display the "Edit Sales Order Line" form. This form is used to add items to the Sales Order.
6. At a minimum, the user must specify the "Part Number" and "Quantity" being ordered for each Sales Order line.
   • The remainder of the fields are either display only or optional.
   • Note: Pricing may automatically pull in based on the Sales Pricing Hierarchy.
7. If adding more lines to the Sales Order, the user can click the "Next" button to save the first line and bring up a blank second line. The Page Down key on the keyboard can be used as a shortcut to accomplish the same thing.
8. Once all the appropriate order lines have been entered, click the "Save" button on the "Edit Sales Order Line" form to save the last line added.
9. Click the "X" at the top of the screen to exit from entering Sales Order lines and return to the Sales Order header.
10. At this point, TaxJar will add one line to the order for the total sales tax amount based on the applicable rates. The rates are calculated as a result of analyzing where goods are being shipped from (determined by the address on the "Facility" used on the order) and where goods are being shipped to (based on the address from the "Ship-To Company" used on the order). The description of the line added to the order is based on the "TaxJar line name" field via System > Maintenance > API Profiles. Once added to the order, the sales tax line cannot be modified but if needed, another line may be added to cancel out the sales tax.
11. Enter any additional information as necessary. Note that if using MRP in DEACOM users will want to ensure the "Due to Ship" date is populated on the "Dates" tab. This date is used to determine in which MRP Bucket the demand for this item(s) on the Sales Order should be placed.
12. When finished, review the order and click the "Save" button.
13. If printing any desired documents, click the "Print" button.

Notes:

• Customers using TaxJar should not use Tax Regions in DEACOM, as the two are not compatible.
• In situations where there is no response from TaxJar (such as when their systems are down), or if the Ship-to or Facility do not contain the adequate address fields(zip/state/country), DEACOM allows an order to be created, but generates an entry in the error log via System > View System Performance. If this occurs at time of shipment, DEACOM will not allow the order to be shipped, and the user will be prompted.
• Users can modify orders containing TaxJar calculated order lines. If any changes to the order amounts, Ship-to record, or Facility record are made, TaxJar will recalculate the taxes appropriately.
• Users cannot modify or delete the sales tax line added to the order via TaxJar.
• When calculating sales taxes using the TaxJar application, a tax region link is created and stored in the dmtaxlink database table within DEACOM. Users will not need to access or verify the information in this table at any point.
• If using TaxJar for sales tax calculations, the "Sales Tax" report via Accounting > Accounting Reporting will not contain entries relating to sales tax since this information will now be available in TaxJar.

Shipping an order

When orders containing TaxJar sales tax lines are shipped, TaxJar will check the information below, and if necessary, recalculate any appropriate tax amounts. Note that TaxJar sales tax lines are not displayed during order shipment.

• Changes to the Facility or Ship-To Company records.
• Order quantity changes.
• Tax rate changes. (Based on the rates stored and maintained via TaxJar)

No action is required by the user in order for tax rates to be verified, and if necessary, recalculated. Once the order information is verified, users can ship the order as normal. Information on shipping sales orders is available via the OutBound Inventory page.

Auto filing state taxes

The auto filing of state taxes is handled completely within the TaxJar application. Users will need to log on to their TaxJar account, verify the information, and complete the necessary steps.

FAQ & Diagnostic Tips

What happens when sales orders containing TaxJar tax lines are un-shipped?

The TaxJar application will remove the sales tax from it's databases to ensure taxes are not applied. In DEACOM, the sales tax line will remain on the un-shipped order.

Does TaxJar calculate sales taxes for Canadian customers?

Yes, TaxJar supports the ability to handle Canadian sales tax.

Do I need to disable Tax Regions in DEACOM if I want to use TaxJar?

No. Tax Regions will be ignored when systems are set to use TaxJar.

Can sales credits which includes sales tax credits be processed using TaxJar?

Yes, sales tax credits will be processed and displayed in TaxJar.

Can TaxJar and DEACOM Tax Regions be used together?

No, the two are not compatible. Customers using TaxJar should not use Tax Regions in DEACOM.

Related Pages

• Processing Orders with Sales Tax