The value added to goods is the difference between the purchase price and the sales price. An example of value-added tax (VAT), more commonly referred to in the USA as sales tax, is the amount of money the government adds in addition to the sales price.
The difference between input tax and sales tax is as follows:
- The input tax is invoiced by the supplier to the company. It represents a demand to the tax authorities.
- The sales tax is invoiced to the customer at all production and trade levels. This represents a tax debt to the tax authorities.
Each company needs to pay sales tax to the tax authorities. The payment is calculated as the difference between the sales tax from sales and the input tax from purchasing.
Entry of Tax Data
When entering an invoice, you must specify a tax code for each invoice item. If you enter an invoice with reference to a purchasing document, the tax codes are proposed from the purchasing document items. If no tax code is defined in a purchasing document item, the system proposes the first tax code from the header data for this invoice item. A default value for the tax code in the header data can be defined for each company code in Customizing for Logistics Invoice Verification.
The two apps for creating supplier invoices differ slightly in the way tax data is entered:
Create Supplier Invoice app
In the Create Supplier Invoice app, the system calculates the tax amounts automatically based on the amounts and the tax codes of the invoice items. If tax codes are not defined in the purchasing document items or for the company code, you must manually enter the tax codes in the invoice items. The tax amounts are then calculated automatically with these entries.
If the specifications in the supplier invoice differ from these values, you must change the entries for tax codes and tax amounts according to the supplier invoice during invoice entry.
Create Supplier Invoice - Advanced app
In the Create Supplier Invoice - Advanced app, you can also have the tax amounts calculated automatically from the item data. To do this, select the Calculate Tax checkbox on the Basic Data tab page in the header data. If you do not select Calculate Tax, you must enter the tax amounts and the relevant tax codes in the header data manually.
For this app, there is an additional customizing setting from Financial Accounting, in which you can define a default value for the tax code for the header data. The customizing settings for Logistics Invoice Verification take precedence over the settings for Financial Accounting.
Customizing – Default Value for Tax Codes
The tax code is defined in Customizing for Financial Accounting (FI). Each tax rate requires a separate tax code to determine how the tax is to be calculated and how it is to be posted. If a tax code has already been used in a document, it cannot be deleted from Customizing and the tax rate cannot be changed, otherwise the system can no longer read the document information correctly.
In Customizing, the following settings influence the default values for the tax code in the Logistics Invoice Verification applications:
In Customizing for Materials Management, choose Logistics Invoice Verification → Incoming Invoice → Maintain Default Values for Tax Codes (OMR2).
Using this function, you define which tax code is the default for the header data. You define the default tax code for each company code. You also define which tax code is a default for unplanned delivery costs. The setting for unplanned delivery costs is relevant only if these costs are posted automatically to a separate general ledger (G/L) account line.
In Customizing for Financial Accounting, choose Accounts Receivable and Accounts Payable → Business Transactions → Incoming Invoices/Credit Memos → Incoming Invoices/Credit Memos - Enjoy → Define Tax Code per Transaction (OBZT).
You use this function to define, depending on the country/region and transaction, which values are available in the input help for the tax code in the header and item data.
You can also define one of these tax codes as a default value per transaction (This default value is only relevant for the Create Supplier Invoice – Advanced app).