Background
When Tigerpaw (TP) and QuickBooks (QB) are combined into a solution, Tigerpaw initiates all invoices. If the TP customer and items are subject to sales taxes, then TP computes the tax amount, adds it to the item total on the invoice, and totals the amount the customer should remit. In addition, a batch process is run periodically that gathers all posted invoices since the last run, and creates a file for importing into QB. This article contains the invoice header information, line item information, and sales tax information.
This process is set in TP by using what is called an Accounting Link. Currently, there are two links that should be considered by QB users: the QB Pro Enhanced link from TP, and the WTS QB Pro link. There are terminology differences between TP and QB but a Tax District in TP is equivalent to a Tax Item in QB, while a TP Tax Code equates to the QB Tax Group.
Link Selection
Both the Enhanced link and the WTS link perform basically the same tasks, but in a different manner from the QB general ledger standpoint. The decision as to which link to use is up to the accounting department. In order to assist with this decision, here are the differences.
Enhanced Link: This link uses the default Sales Tax Payable GL account from QuickBooks, along with the QuickBooks sales tax reporting and payments under Vendors –> Sales Tax. Reporting is available in both QB and TP.
This link requires that the Tax District from TP matches the Tax Item in QB, both in name and rate. There is no automatic synchronization of the two during setup or when a rate changes. If more than one Tax District is used on an invoice, all charges are not visible on the QB invoice view and the Invoice view does not total properly (see Page 503 of TP User Guide).
The Vendor on the Tax District in TP must match the same Vendor name on the Tax Item in QB. There is no automatic synchronization of Vendors. If a vendor in TP is also a customer, then the vendor’s name must be different than the customer’s name.
WTS QB Pro Link: Instead of the default Sales Tax Payable, this link requires new Other Current Liability accounts be created to act as holding accounts for sales taxes before they are paid. Although only one account is needed, several accounts can be utilized, one for each Taxing Authority (state). This serves to keep the funds separated, and allows for discounts to be properly accounted for. When your taxes are due, run the report from TP and write checks to each taxing authority, crediting each particular account, rather than one single account. There is no requirement for matching Vendors and Tax Items in QuickBooks.
Individual sales tax amounts are shown as line items on the QB invoice, and the invoice view totals correctly.
Sales Tax Parameters
In Tigerpaw there are two fields that are used to determine the total tax rate for a particular Account. The Tax District carries the name of the District, the percentage to be taxed, the GL account to be used for this tax, and the name of the taxing authority (vendor). This Tax District is the lowest reporting breakdown and may also contain special tiered taxation for those states that use them. The Tax Code has a unique name, consists of one or more Tax Districts, and a computed consolidated rate. The Tax Code is assigned to an Account, and is automatically transferred to each Service Order for that Account. An individual Service Order can have this assigned code changed, and the changed code will pass through to the invoice.
As an example, the State of South Carolina has a 5% rate (Tax District=SC, 5%). The county of Pickens has a local option tax of 1% (Tax District=PickensCounty, 1%). The county of Greenville does not have a local option tax. The Tax Code of South Carolina consists of only the Tax District of SC, so its total is 5%. The Tax Code of Pickens SC has both the Tax District of SC plus the Tax District of PickensCounty, so it has a consolidated rate of 6%, and reports both rates on the reports. Accounts in Greenville County carry the Tax Code of South Carolina, while the accounts in Pickens County carry the Tax Code of Pickens SC.
The names of these Districts and Codes are determined by the user, not by Tigerpaw. It is recommended that the creation of these codes be done with the reporting requirements in mind. Some states want their own codes used on the reports. The assignment of a Tax Code to a specific account is a one time determination, whereas the reporting is normally performed monthly.
It is recommended by WTS that the default TP Tax Code of {Exempt} (Null condition) never be used. Instead, create a Tax Code of Exempt that has a rate of zero percent. The difference in these two methods shows up in tax reporting, where a sale with the code of Exempt will show up in Total Sales, but the sales to {Exempt} codes do not.
Disclaimer: This document expresses the findings and opinions of Williams Technology Solutions, and does not necessarily reflect those of Tigerpaw Software, Inc. or Intuit.