How Do I Start to Collect Sales Tax for Other States?

Release Date: 08/02/2018

Q - I have been asked by other states to collect sales tax on their behalf.  How do I do that?

A - First, in each customer and ship-to record, there are three sales tax codes that you can enter.  We suggest that you use the following principles in assigning each tax code:
  • Tax-Code-1 = State Tax Code
  • Tax-Code-2 = County Tax Code
  • Tax-Code-3 = City Tax Code (or District Tax Code)
See sample screen below:


You would set up each state, county and city as a separate tax code in A/R -> Maintenance -> Tax Code File Maintenance. For using this application, you can refer to the following KB article:
                http://support.elliott.com/knowledgebase/articles/860409-artaxmnt-accounts-receivable-tax-code-file-mainten

The following is an example of the California state sales tax code:


The following is a list of examples for California county and city tax codes:


Below is an example of the Los Angeles County tax code detail:


Below is an example of the Inglewood city tax code detail:


As of this writing, if you live in the county of Los Angeles, your sales tax will be:
                CA (7.25%) + CLA (2.25%) = 9.5%
If you live in the city of Inglewood, which is part of LA county, your sales tax will be:
                CA (7.25%) + CLA (2.25%) + CIG (0.75%) = 10.25%
It is your duty to revise the tax rate in each tax code as they are changed. The state from which you need to collect sales tax will advise you if any sales tax rate change is coming.

If you are interested in letting the Elliott system automatically assign sales tax codes when a customer or ship-to is added, the system can determine the sales tax codes for you automatically.  See the following KB article for more details:
     http://support.elliott.com/knowledgebase/articles/406214-auto-assigned-sales-tax-code-by-state-and-county

Finally, as the time comes to report the sales tax you collect, you can go to A/R -> Reports -> Sales Tax Liability report and it will give you the detailed breakdown to help you to file for the sales tax return for that state.  See the following KB article for more details:
    http://support.elliott.com/knowledgebase/articles/859515-arstlscn-accounts-receivable-sales-tax-liability-r

The tax code is user-definable so you don’t have to follow the above example. But keep in mind that there are only 3 digits, so you want to be concise with each digit. We recommend that you use the first digit to represent the state. In this case C = CA. Then you have two more digits to represent the county and city, which should be sufficient. If you also need to collect sales tax for, say, Colorado, then you will use a different letter other than “C.”


EMK

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