If you use a tax service, then in the tax service portal or website:

• Define your organizational structure and the tax jurisdictions where your organization is registered to collect tax.
• Identify the products and services that you buy and sell, and map those products and services to the tax rules and categories for the tax service.
• Identify your customers and suppliers, and manage their taxability exemptions.

You can use the following fields in Kenandy to indicate tax exemptions:

• The Usage Type field for the ship-to customer record. This field applies to only the Avalara tax service. A value in this field indicates the customer associated with the source document is exempt from tax. Each usage type is associated with an entity code. For example, a usage type of Federal Government (entity use code A) exempts the customer from sales tax because the customer is the federal government.
• The Tax Exemption Number field on the ship-to customer record. A value in this field indicates that the customer associated with the source document is exempt from tax.
• The Tax Code field on the product record. A value in this field indicates that the product or service associated with the source document is exempt from tax.

  The Tax Code field on the product record describes the product. You can also use the UPC Code field on the product record to describe the product. Instead of sending the Tax Code field to the tax service, you can send the UPC Code field to the tax service, and then on the tax service map the UPC Code to a description of the product.

Not all orders and invoices have tax. The following table shows the types of orders and invoices to which tax applies:

Order or Invoice	Taxable Types
Sales Order	Standard, Adjustment, Drop-Ship, RMA-Credit, RMA-Customer Repair, Back-to-Back
Customer Invoice	Standard, Adjustments, RMA, Manual
Purchase Order	Standard, Subcontract, Drop-Ship
Supplier Invoice	Invoice, Credit Memo

You can estimate tax on a quote after you add lines to the quote. If you change the quote after you estimate tax, you can update the estimate. The tax estimates on the quote lines reflect the latest estimates.

If you use Avalara to estimate tax on quotes, calls are made to the tax service, and the tax service estimates the appropriate tax.

1. On the Quotes list view page, click the link for the quote on which you want to estimate tax.

   You can also estimate tax when you create a new quote.

2. Click Review and Send.
3. On the page that is displayed, click Get Tax.

   The estimated sales tax is displayed in the Sales Tax Amount field and the Sales Tax Rate field on the quote lines. The sales tax amount on the quote lines is summarized in the Sales Tax Amount field on the quote. The Sales Tax Rate field on a quote line includes the sales tax rate that applies to the line.

   The value in the Sales Tax Amount field is not added into other quote fields.

You can estimate tax on a sales order after you add lines to the sales order. If you change the sales order after you estimate tax, you can update the estimate. The tax estimates on the sales order lines reflect the latest estimates. You calculate the actual tax on the customer invoice associated with the sales order.

If you use Avalara or Vertex to estimate tax on sales orders, calls are made to the tax service, and the tax service estimates the appropriate tax.

1. On the Sales Order list view page, click the link for the sales order on which you want to estimate tax.

   You can also estimate tax when you create a new sales order.

2. On the Sales Order detail page, click Edit or Manage Lines and then click Get Tax

Alternatively from the sales order page you can click Actions and then select Get Tax.

The estimated sales tax is displayed in the Sales Tax Amount field and the Sales Tax Rate field on the sales order lines. The sales tax amount on the sales order lines is summarized in the Sales Tax Amount field on the sales order. The Sales Tax Rate field on a sales order line includes the sales tax rate that applies to the line.

The estimated VAT is displayed in the VAT Amount field and the VAT Rate field on the sales order lines. The VAT amount on the sales order lines is summarized in the VAT Amount field on the sales order. The VAT Rate field on a sales order line includes the VAT rate that applies to the line.

The values in the Sales Tax Amount field and VAT Amount field are not added into other sales order fields.

From the Customer Invoice page, you can calculate tax on only manual customer invoices because other customer invoices are finalized when they are created.

The Customer Invoice batch process job automatically calculates tax. For the customer invoices that it processes, the Customer Invoice PreFinalize Batch process job calculates final taxes after the batch completes, but before it is finalized.

If you use Avalara or Vertex to calculate tax on customer invoices, calls are made to the tax service, and the tax service calculates the appropriate tax.

1. On the Customer Invoice list view page, click the link for the customer invoice on which you want to calculate tax.

   You can also calculate tax when you create a new customer invoice.

2. On the Customer Invoice detail page that is displayed, click Edit.
3. Click Actions and select Get Tax.

   The calculated sales tax is displayed in the Sales Tax Amount field and the Sales Tax Rate field on the customer invoice lines. The sales tax amount on the customer invoice lines is summarized in the Sales Tax Amount field on the customer invoice. The Sales Tax Rate field on a customer invoice line includes the sales tax rate that applies to the line.

   The calculated VAT is displayed in the VAT Amount field and the VAT Rate field on the customer invoice lines. The VAT amount on the customer invoice lines is summarized in the VAT Amount field on the customer invoice. The VAT Rate field on a customer invoice line includes the VAT rate that applies to the line.

   The values in the Sales Tax Amount field and VAT Amount field are added into the Amount field on the customer invoice line, but are not added into the Extended Price field or other customer invoice fields.

You can estimate tax on a purchase order after you add lines to the purchase order. If you change the purchase order after you estimate tax, you can update the estimate. The tax estimates on the purchase order lines reflect the latest estimates. You calculate the actual tax on the supplier invoice associated with the purchase order.

If you use Vertex to estimate tax on purchase orders, calls are made to the tax service, and the tax service estimates the appropriate tax.

Because purchase orders can exclude taxes and supplier invoices can include taxes, line amount differences might exist when you create supplier invoice lines from purchase order lines. These differences appear as exceptions when you generate the accounting for the supplier invoice. You can override these exceptions.

1. On the Purchase Order list view page, click the link for the purchase order on which you want to estimate tax.

   You can also estimate tax when you create a new purchase order.

2. On the Purchase Order detail page that is displayed, click Edit.
3. Click Save, and select Save and Get Tax.

   The estimated sales tax is displayed in the Sales Tax Amount field and the Sales Tax Rate field on the purchase order lines. The sales tax amount on the purchase order lines is summarized in the Sales Tax Amount field on the purchase order. The Sales Tax Rate field on a purchase order line includes the sales tax rate that applies to the line.

   The estimated VAT is displayed in the VAT Amount field and the VAT Rate field on the purchase order lines. The VAT amount on the purchase order lines is summarized in the VAT Amount field on the purchase order. The VAT Rate field on a purchase order line includes the VAT rate that applies to the line.

   The values is the Sales Tax Amount field and VAT Amount field are not added into other purchase order fields.

When an invoice that you received from a supplier includes tax, you enter the tax in the supplier invoice that you create in Kenandy twice. You enter the tax in the supplier invoice fields that are included in the amount that you pay to the supplier by entering tax in the Unit Price field on the invoice lines or by entering a separate invoice line for tax. You enter the tax in the supplier invoice fields that include information that is sent to your tax service to calculate taxes (such as the Charged Tax field at the invoice level or on the invoice lines and the Tax Included field on the invoice lines).

You can reflect this tax on the invoice that you enter in Kenandy using one of the following three ways.

Option 1

If the tax amount is included in a separate invoice line in the invoice that you received from the supplier, then enter the tax amount as a separate invoice line, and enter the tax amount in the enterable Charged Tax field at the invoice level. Because you enter charged tax at the invoice level, make sure that the Tax Included checkboxes on the invoice lines are not selected and that the Charged Tax fields of the invoice lines are blank, and not 0 or other amounts.

To make sure that the tax amount you enter as a separate invoice line is not taxed again, verify that the miscellaneous item on the line is set up as tax exempt in your tax service.

The following diagram shows the fields in which you enter data for a supplier invoice with $81.76 tax as a separate invoice line. For this invoice, you don't know the tax amount by invoice line:

Enterable Charged Tax field on the invoice:			81.76
Display-only Charged Tax field on the invoice: This field displays the sum of the amounts on the invoice lines.			0.00
Line	Quantity	Price	Extended Price	Charged Tax	Tax Included
1	5	100.00	500.00		not checked
2	4	80.00	320.00		not checked
3	3	116.00	348.00		not checked
4	1	81.76	81.76		not checked
		Total	1,249.76	0.00

Option 2

On the invoice that you received from the supplier, if the tax amounts are shown separately for each invoice line and included in the extended price on the invoice lines, then select the Tax Included checkboxes on the invoice lines, and enter the tax amounts in the Charged Tax fields of the invoice lines. The display-only Charged Tax field at the invoice level is automatically populated with the total of the tax amounts in the Charged Tax fields of the invoice lines. Because you enter charged tax for the invoice lines, make sure that the enterable Charged Tax field at the invoice level is blank, and not 0 or another amount.

The following diagram shows the fields in which you enter data for a supplier invoice with $81.76 tax included in the extended price for the invoice lines. For this invoice, you know the tax amount by invoice line:

Enterable Charged Tax field on the invoice:
Display-only Charged Tax field on the invoice: This field displays the sum of the amounts on the invoice lines.			81.76
Line	Quantity	Price	Extended Price	Charged Tax	Tax Included
1	5	100.00	535.00	35.00	checked
2	4	80.00	342.40	22.40	checked
3	3	116.00	372.36	24.36	checked
		Total	1,249.76	81.76

Option 3

On the invoice that you received from the supplier, if the tax amounts are shown separately for each invoice line and excluded from the extended price on the invoice lines, then do not select the Tax Included checkboxes on the invoice lines, and enter the tax amounts in the Charged Tax fields of the invoice lines. The display-only Charged Tax field at the invoice level is automatically populated with the total of the tax amounts in the Charged Tax fields of the invoice lines. Because you enter charged tax for the invoice lines, make sure that the enterable Charged Tax field at the invoice level is blank, and not 0 or another amount.

The following diagram shows the fields in which you enter data for a supplier invoice with $81.76 tax as a separate invoice line and excluded from the extended price for the invoice lines. For this invoice, you know the tax amount by invoice line:

Enterable Charged Tax field on the invoice:
Display-only Charged Tax field on the invoice: This field displays the sum of the amounts on the invoice lines.			81.76
Line	Quantity	Price	Extended Price	Charged Tax	Tax Included
1	5	100.00	500.00	35.00	not checked
2	4	80.00	320.00	22.40	not checked
3	3	116.00	348.00	24.36	not checked
4	1	81.76	81.76	0.00	not checked
		Total	1,249.76	81.76

About the Charged Tax Fields

The amounts in Charged Tax fields do not change the amount of the invoice, but are amounts that your tax service uses to perform a comparison of its calculated tax to the tax that the supplier charges.

At the invoice level, there are two Charged Tax fields. One of the fields includes a display-only sum, while you can enter a value in the other field. The display-only Charged Tax field includes the total of the tax amounts that you enter at the invoice line level in the Charged Tax fields, while the enterable Charged Tax field includes the tax that you enter at the invoice level. Your system administrator might hide one of these fields in the user interface if the field doesn't apply to your business operations.

If you use Vertex to verify tax on a supplier invoice, a call is made to the tax service to calculate the appropriate tax. This verification does not change the tax that you enter on the supplier invoice. The tax service does not record any information about the invoice until after you save and validate the invoice.

1. On the Supplier Invoice list view page, click the link for the supplier invoice on which you want to verify tax.

   You can also verify tax when you create a new supplier invoice.

2. On the Supplier Invoice detail page that is displayed, click Edit.
3. Click Actions, and select Verify Tax.

   One of the following messages is displayed:

   • A message indicating that the tax amount that the supplier charged you on the invoice is the same as the tax amount that the tax service calculated for the invoice.
   • A message indicating that the tax amount that the supplier charged you on the invoice is different from the tax amount that the tax service calculated for the invoice.
4. If no difference exists, click Save and Validate to continue to process the invoice.
5. If a difference exists, take one of the following actions:
   • Click Save and Validate to continue to process the invoice and ignore this difference.
   • Investigate this difference to determine the appropriate action, if any, to take to eliminate it.

     You might take any of the following actions:

     • Delay further processing of the invoice until you can correct the difference.
     • Ask the supplier to issue a revised invoice to show the correct tax, and then change the Charged Amount fields for the invoice when you receive the revised invoice.
     • Update information in Vertex to correct the criteria used in the tax calculation. For example, you might reclassify an item as tax exempt.

When you validate supplier invoices, tax is automatically calculated on the invoices.

If you use Vertex to calculate tax on supplier invoices, calls are made to the tax service, and the tax service calculates the appropriate tax. The tax service returns to Kenandy only the tax amount by which its calculated tax amount exceeds the charged tax amount on the supplier invoice, and not the total tax amount for the invoice.

1. On the Supplier Invoice list view page, click the link for the supplier invoice on which you want to calculate tax.
2. On the Supplier Invoice detail page that is displayed, click Edit.
3. Complete either of the following steps:
   • Click Save, and select Save and Validate.
   • Click Actions, and select Validate.

     The calculated sales tax less the charged tax amount is displayed in the Sales Tax Amount field and the Sales Tax Rate field on the supplier invoice lines. The sales tax amount on the supplier invoice lines is summarized in the Sales Tax Amount field on the supplier invoice. The Sales Tax Rate field on a supplier invoice line includes the effective, accrued, sales tax rate that applies to the line.

     The calculated VAT less the charged tax amount is displayed in the VAT Amount field and the VAT Rate field on the supplier invoice lines. The VAT amount on the supplier invoice lines is summarized in the VAT Amount field on the supplier invoice. The VAT Rate field on a supplier invoice line includes the effective, accrued, VAT rate that applies to the line.

     If the tax amount that the tax service calculates for a supplier invoice line is more than the amount in the Charged Tax field for that line, then the difference is populated in the Sales Tax Amount or VAT Amount field as a positive amount. You can set up your accounting rules for supplier invoices to create an accrual for this liability in a taxes payable account. For example:

     DR Accounts Payable <sales tax amount>
     CR Sales Tax Payable <sales tax amount>
     DR Accounts Payable <VAT amount>
     CR VAT Payable <VAT amount>

     If the tax amount that the tax service calculates for a supplier invoice line is less than or equal to the amount in the Charged Tax field for that line, then no amount is populated in the Sales Tax Amount or VAT Amount field.

     The values in the Sales Tax Amount field and VAT Amount field are not added into other supplier invoice fields.

You can access your tax service to obtain information and reports, such as:

• All calculated tax amounts for supplier invoices and customer invoices.
• The differences between the tax amount that the supplier charged you on invoices and the tax amount that the tax service calculated for invoices.
• Amounts of use tax for supplier invoices.

You might use this information to create additional accruals, if necessary, or to file tax returns.