How to Set Up a Sales Tax Calculation Formula in Sage 50?

When you choose to set up sales taxes, you choose the right tax calculation for the particular agency.

In case the agency needs a single rate, you choose the Single Tax Rate option and after that add the rate as a percentage. However, if the agency needs a dollar limit on sales or a two-tier rate, you choose the Formula option. This enables you to set up a particular formula, with the help of which the tax rate will be determined.

Note: A sales tax code is a cluster of one or more than one sales tax authorities. When you prepare invoices, you utilize the sales tax code to determine the sales tax. You can witness how much sales tax has been accumulated by each authority in the particular Taxable/Exempt Sales report.

How to Set up a Tax Calculation Formula?

Here are the steps to set up a tax calculation formula:

• Choose By Formula in the field for How Are Sales Tax Calculated for (Agency Name).
• Access the drop-down list in the field for, Which Amount Must Be Used To Calculate Sales Taxes. This field must be chosen either to use the formula to total taxable sales or every taxable line item.
• At the option, For the First $, add the dollar limit enforced by the tax authority body.
• At the Charge section, Add the standard tax rate (percentage) that is valid to the sales amount up to this dollar limit.
• At the option for Then Charge, add the tax rate (percentage) that is valid to the sales amount over and above the implied dollar limit.

How to Calculate Sales Taxes Depending on State Tax Regulations?

Several state tax organizations have sales tax rules that require the utilization of a formula. Here is a list of such requirements along with the formulas required to meet every requirement and the particular state that levy the requirement.

Maximum Dollar Sales Amount: States that need the use of such tax calculation process include Florida, Arkansas, and Tennessee. The usual tax rate is levied to the sales amount. However, the particular amount is subjected to a fixed maximum dollar limit on which the rate applied is a lower rate or zero.

For instance, Let’s say the state sales tax is 1percent of sales amount to particular limit of USD 3000. Hence, any part of the sales amount above USD 3000 is not taxable.

To address the tax requirement, you need to do the following steps:

• Choose the option, By Formula.
• Choose Total Taxable Sales.
• At the option, For the First USD, Add USD 3000 (the dollar limit).
• At the option, Charge, add 1.0 as the specific tax rate implied on the dollar limit
• At the option, then charge, add 0 percent as the particular tax rate implied on the sales amount over and above the given dollar limit.

Minimum Dollar Sales Amount: Louisiana need the use of such tax calculation process. The usual tax rate is levied only to the sales amounts beyond the particular dollar limit. For instance, let us assume that the state sales tax is 1 percent. The first USD 1000 of the sales amount is not taxable.

In order to address the tax requirement, you need to perform the steps given below:

• Choose the option, By Formula.
• Choose Total Taxable Sales.
• For the first USD, Add USD 1000.
• In the Charge option, Add 0 percent as the particular tax rate implied on the dollar amount.
• In the Then Charge option, Add 1 percent as the particular tax rate implied on the sales amount over and above the particular dollar limit.

Maximum Dollar Tax Amount: States that need the use of such tax determination process include North Dakota, Tennessee, North Carolina, Vermont, and South Caroline. The usual tax rate is levied to the sales amount, the specific amount that is subjected to a particular maximum dollar limit. For instance, let’s say the state sales tax is 1 percent. The rate is levied to a sale only, as long as the maximum tax amount of USD 25 is not met.

In order to address the tax requirement, you need to perform the steps provided below:

• Choose the option, By Formula.
• Choose Total Taxable Sales.
• At the option, For the first USD, Add USD 3000 (the dollar limit).
• At the option for Charge, Add 1percent as the particular tax applied on the given dollar limit to reach at the maximum tax amount of USD 30.
• At the option for Charge, Add 0 percent as the particular tax applied on the sales amount over and above the particular dollar limit.

Maximum Percent Sales Amount: States that need the use of tax determination method comprise Minnesota, Maryland, and South Carolina. The usual tax rate is applicable to a particular maximum percentage (below 100 percent) of the particular sales amount. An instance of such a calculation is a state sales tax of 1 percent that is levied to the 65 percent of the total sales amount.

To address the tax requirement, you need to perform the steps provided below:

• Choose the Single Tax Rate.
• Add .65 as the Tax Rate.

What are the Formulas for Each Taxable Line Item?

Whether you select to base your sales tax formula on the total sale amount or on every taxable line item, the tax determination will be levied to the total invoice amount. However, the calculation will be done in a different manner, leading to different tax amounts.

For instance, let’s say USD 6000 is the dollar limit that is taxable. It is taxable at the first tax rate of 5 percent. You select to tax any amount of the sales amount over and above this particular limit at 1 percent rate.

The following table will display how the sales tax will be determines, depending on total taxable sales or on every taxable line item.

Total Taxable Sales

Invoice Line Item	Amount	Tax at 5%		Tax at 1%
1	$6,000
2	$4,000
3	$10,000
Total Invoice Amount	$20,000	$5,000		$15,000
Total Tax Amount		$250	+	$150	=	$400

Each Taxable Line Item

Invoice Line Item	Amount	Tax at 5%		Tax at 1%
1	$6,000	$4000		$2000
2	$4,000	$4000		0
3	$10,000	$10000		0
Total Invoice Amount	$20,000	$18,000		$2,000
Total Tax Amount		$900	+	$20	=	$920

Note: The key differences will be highlighted in the Taxable/Exempt sales report for this particular transaction.

What is a Taxable/Exempt Sales Report?

A Taxable/Exempt sales report is used to print a particular list of all the sales taxes that are applied to clients on sales along with sales of tax exempt services or items. You must print this when you wish to send you sales tax income statement. It can be quarterly, monthly, or yearly.

You need to click the Options button to analyze the data criteria for the reports you wish to print or see. For this particular report, Sage 50 shows the following filter options:

• Summarize Report: When you check this option, it displays the total for all the taxing authority by taxable sales and the total for all type of exemption.
• Date: You have the option of Today, All Range, This Period, and the month, week, quarter, period, and year-to-date. If you choose Range, you can add a starting and ending date.
• Choose a Filter: First, you need to choose a filter on the left. Now define the options for that particular filter present on the right. The options change, depending on the filter chosen.
• Accounting Method for Sales Tax: You can select to report sales taxes on either accrual or cash basis. Some states need that the process used for sales tax should be on an accrual basis, irrespective of the normal accounting method. Other states need that you utilize the same accounting process for sales tax that you utilize for your normal accounting. Take a look at the state regulations for the right method.

Conclusion

We hope this article was helpful for you to understand how to set up sales tax calculation formula in Sage 50. In this article we have talked about all the important steps regarding the formula. Still, if you get stuck anywhere and need professional assistance, we recommend you to connect with our team of Sage experts.

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