Manage Tax Rate Changes

This article should not be considered tax advice. You should consult with a tax professional if you are unsure of the correct tax outcomes for your scenarios, and contact Momentus if you need additional assistance with the software processes and configuration required to support those outcomes.

This article contains general solutions for managing tax rate changes. According to your specific requirements, you may need additional configuration or customization steps (reports, interfaces, etc.). Should you require any additional assistance, contact Momentus to schedule a meeting with a consultant.

Tax rate changes are organization-specific. If you use multiple organizations, you must execute the required steps in all organizations effected by the tax rate change.

How you approach your tax rate change depends on the following:

• Payment Plan Invoicing - Do you invoice payment plans?
• Tax Setup - Do you use resource based or price list based taxes? To find out what tax setup you use: 
  • Click the Tax Resources link from the Main Menu. The Tax Resources screen opens.
  • Select a tax resource you currently use. If you use Purchasing/Accounts Payables, do NOT select any of the tax resources that have a code which starts with 8AP as they are always resource based.
  • Review the setup of the tax resource and find the Price List Used to Calculate Tax Rate check box.
    • If the check box is unchecked, you use resource based taxes.
    • If the check box is checked, you use price list based taxes.
• Tax Effective Date - Do you calculate your taxes based on an event date (date of delivery) or order date? To find out which tax effective date you use:
  
  • Click the Tax Configuration link from the Main Menu. The Tax Configuration screen opens.
  • Review the option selected in the Order Tax Date drop-down:
    • Order Date - Taxes are calculated based on the date the order is/was created.
    • Event Start Date, Event End Date, Event Move In Date or Event Move Out Date - Taxes are calculated based on an event date (date of delivery).

Once you know your configuration, you can proceed with the process to update the tax rate. 

Step 1: Update the Tax Rate

The first step is to update the tax rate to to the new tax rate. You can do this before the rate becomes effective. For example, a tax rate change is effective for January 1 but you want to update the system in December. The process for updating the tax rate is different depending on the tax setup you use (resource based or price list based). Refer to the section below that applies to your tax setup.

Update the Tax Rate for Resource Based Taxes 

The tax rate is configured on the tax resource for resource based taxes.

1. Click the Tax Resources link from the Main Menu. The Tax Resources screen opens.
2. Select the tax resource to update.
3. Right-click and select Edit. The Edit Tax Resource screen opens.
4. Click the Add button in the Tax Rates tab. The Add Tax Rate screen opens.
5. Enter the necessary information:
   • Rate - Enter the new rate.
   • Effective Date - Enter the date when the new tax rate is applicable.
6. Click OK.

The tax resource description should never contain the actual tax rate but a general description like VAT, Reduced VAT, or Sales Tax. If your tax resource has the rate in the description, see Step 2 for details on updating the tax resource description. 

See Configuring Tax Resources for more information on setting up tax resources.

Update the Tax Rate for Price List Based Taxes 

The tax rate is configured on the price list item for price list based taxes. If you use multiple active price lists, you must update the rate in each price list.

1. Click the Price Lists link from the Main Menu. The Price Lists screen opens.
2. Select the price list that requires the tax rate update.
3. Right-click and select Edit. The Edit Price List screen opens.
4. Search for the tax rate resource in the Price List Items tab. Usually the tax rate resources are on the Taxes order form or you can search by description.
5. Select the tax rate resource that requires the new tax rate.
6. Right-click and select Edit -> Edit. The Edit Price List Item screen opens.
7. Select the Costs tab. 
8. Check the Tax Rate Change check box. 
9. Enter the date when the new tax rate becomes applicable into the Tax Rate Date field.
10. Select the Pricing tab.
11. Enter the new tax rate into the Late Price field. The Standard Price field displays the old/current rate.
12. Click OK. Repeat steps 2 - 10 for all price lists as necessary.

The tax item description should never contain the actual tax rate but a general description like VAT, Reduced VAT, or Sales Tax. If your tax item description has the rate in the description, see Step 2 for details on updating the tax item description. 

Step 2: Update the Tax Rate Description (Optional)

Proceed to step 3 if you do not need to change the tax rate description.

It is not the recommended to have the current tax rate in the tax resource/price list item description. This keeps you from being able to manage multiple tax rates (old and new) at the same time. If your tax resource/price list item description currently contains the rate, best practice is to change it to a general description. 

If you have the current tax rate in the tax resource/price list item description and you choose to keep the rate within the description, you must update the description on the day the new tax rate is effective.

Additional changes may be required to display the tax rate on Crystal Reports correctly (the reports should take the current rate from the rate/price field and show it in addition to the tax rate description). You should change and test the description in your Test environment first to see if any reports displaying taxes require an update. If you require any additional assistance, contact Momentus to schedule a meeting with a consultant.

To update the tax resource/price list item description:

1. Click the Tax Resources link from the Main Menu. The Tax Resources screen opens.
2. Select the tax resource to update.
3. Right-click and select Edit. The Edit Tax Resource screen opens.
4. Update the information in the Description field.
5. Click OK.

After updating the description, you need to update the description of the tax items on all open orders. To do this, use the Resource Synchronization process. 

If you use a price list based taxes, synchronizing the description also updates the description for all price list tax items. 

Update Description for Payment Plan Taxes

If you use payment plan invoicing, you may need to update the description of the payment plan tax (class 9) resources:

1. Click the Payment Plan Resources link from the Main Menu. The Payment Plan Resources screen opens.
2. Select the tax resource to update.
3. Right-click and select Edit. The Edit Payment Plan Resource screen opens.
4. Update the information in the Resource Type Description field.
5. Click OK. 

Step 3: Payment Plan Invoicing Configuration

This step only applies if you invoice payment plans. Proceed to step 4 if you use event invoicing or quick invoicing.

General information about tax rate changes with payment plan invoicing:

• The tax rate change does not affect existing invoices already issued as deposits for events in the future. For example, if an invoice was issued for an event in the next year, where the new tax rate is effective as of January 1, this past invoice with the old tax rate is not changed. The next invoice on or after January 1 uses the new tax rate.
• You can invoice items through a payment plan partially with an old tax rate and partially with a new tax rate.
• Tax calculation on the actual/final payment plan step depends on the setup of your Tax Effective Date:
  • Tax Effective Date Based on Event Date - The final payment plan step accounts for the difference between the new tax rate for all actually invoiced amounts and the previously invoiced tax on deposit invoices with the old rate (as an additional tax charge if the tax rate change is an increase or reduction of the tax amount on the final invoice if the tax rate change is a decrease). This means that the entire amount of the payment plan is subject to the new tax, regardless of how much was invoiced with the old tax rates. This is the system behavior for this scenario. Not accounting for the tax difference requires you to add an additional manual tax adjustment item to the payment plan prior to invoicing the final step.
  • Tax Effective Date Based on Order Date - The payment plan may contain orders added prior to the tax rate change effective date (added with the old rate) and some entered after the tax rate change became effective. In this case, the actual/final payment plan step contains both tax rates. Any items you add to an existing order (calculated with the old tax rate) after the new rate is effective still calculates with the old tax date since the order date is in the past. You need to add new items items to a new service order. In general, the Order Date tax effective date configuration is not common practice with payment plans.

Update Payment Plans

How you prepare for updating existing payment plans depends on if you made changes to the tax resource/price list item description.

If you have not made any changes to the tax resource/price list item description (you skipped Step 2: Update the Tax Rate Description):

1. Click the Organization Parameters link from the Main Menu. The Organization Parameters screen opens.
2. Locate organization parameter AR (application) 301 (code). The description for the parameter is Auto Recalculate Payment Plans.
3. Verify there is a Y in the Alphanumeric Value for the parameter. If the value of the parameter is not Y, update it to Y.
4. Click the Apply button.
5. Locate organization parameter AR (application) 901 (code). The description for the parameter is Recalculate Payment Plan Taxes Based on Issue Date.
6. Verify there is a Y in the Alphanumeric Value for the parameter. If the value of the parameter is not Y, update it to Y.
7. Click OK. Repeat steps 1 - 7 for all organizations affected by the tax rate change.
8. Proceed to the next section, Step 4: Update Existing Orders.

If you have made changes to the tax resource/price list item description (you completed Step 2: Update the Tax Rate Description), you need to execute the Tax Tool application. The Tax Tool application is provided by Momentus to prepare any existing payment plans to manage the tax update. This tool enables organization parameter AR 901, updates the description for tax on existing payment plans and marks them as Auto-Recalculate so that tax is computed correctly when the payment plans are opened. If your database is hosted by Momentus, Momentusmust execute the Tax Tool application. Submit a ticket with the Client Care Team to notify them that you need to run the Tax Tool application on your database.

If you have an on-premise database or you use third-party hosting, you must execute the Tax Tool on the server of your installation. To run the Tax Tool:

1. Download the TaxTool 1.0.zip file attached to this article.
2. Run the Tax Tool. Click OK on the message reminding you of updating any tax rate descriptions prior to running the tool. You should have completed this in Step 2: Update the Tax Rate Description.
3. Enter the following information:
   • Database Type - Select your database type, usually SQL Server.
   • Server - Enter the name of the server for your database.
   • User Name - Your user name or USIADMIN.
   • Password - Your user password or your USIADMIN password.
   • Database - Select the correct database.
4. Click Next. 
5. Select the organization for the Tax Tool. You usually select all affected by the tax rate change.
6. Click OK. A message appears when the process has completed.
7. Close the Tax Tool.

Step 4: Update Existing Orders

Having completed Step 1: Update the Tax Rate, Enterprise automatically applies the new tax rate once the effective date is applicable. Remember this is dependent upon the Tax Effective Date setup (order date or event date).

For example, today is December 15 and the new tax rate becomes effective January 1. Your user adds a new order for an event in August next year.

• If the Tax Effective Date is based on an event date (start, end, move-in or move out), the new tax rate is used.
• If the Tax Effective Date is based on the order date, the old tax rate is used. The new tax rate is used when users add orders on or after January 1. 

For any existing orders, you may need to run a recalculation. A recalculation is needed in the following scenarios:

• The Tax Effective Date setup is based on event date (start, end, move-in or move out) and there are already orders that belong to an event that happens after the new tax effective date. This scenario is not very likely.
• The Tax Effective Date setup is based on the order date and you are managing the tax rate change already past the effective date, meaning there are orders that should have been created with the new tax rate.

Assign the Order Tax Recalculation Access Privilege

Prior to recalculating the existing orders, make sure you assign all users and/or roles performing the order recalculation to the Allow Order Tax Recalculation Task Access access privilege.

1. Click the Access Privileges link from the Main Menu. The Access Privileges screen opens.
2. Locate the Allow Order Tax Recalculation Task Access access privilege.
3. Right-click and select Edit. The Edit Access Privilege screen opens.
4. Click the Manage button in the Access Privilege Details tab. The Assign Access Privileges screen opens.
5. Select the user(s) and/or roles(s) that need access from the Available section of the screen.
6. Click the right arrow button to move the selected users and/or roles to the Selected section of the screen.
7. Click OK.

Recalculate Orders

You can either do a cross-event order update or ask the event coordinator users to take care of their events on an event by event basis.

Update Service Orders

1. Click the Service Orders link from the Main Menu. The Service Orders screen opens.
2. Filter the screen to all service orders to recalculate. 
   • Mandatory Filters:
     • Order Status - Exclude any Closed or Cancelled statuses since you cannot recalculate them.
     • Specific Event or Event Date (Start/End/Move In/Move Out) or Order Date
   • Optional Filters - Since the update may take a while for a large number of orders, you may want to add additional filters to reduce the number (e.g. by reducing the date time frame).
3. Select all service orders to recalculate.
4. Right click and select Tools -> Recalculate Taxes. The Recalculate Taxes screen opens.
5. Enter the following information
   • Modify Tax Date - Check the check box.
   • Set Modified Tax Date - Select the date to use for tax calculation:
     • If your Tax Effective Date setup is based on event date (start, end, move-in or move-out), select the event date that matches your setup (Event Start Date, Event End Date, Event Move In Date or Event Move Out).
     • If your Tax Effective Date setup is based on order date, select Order Date. If you have an order entered prior to the new tax rate date but you still want to calculate it with the new tax rate, select Enter Date and provide a date past the new tax effective date in the Date field.
6. Click OK. The orders update with the correct tax.

Update Registration Orders

1. Click the Registration Orders link from the Main Menu. The Registration Orders screen opens. 
2. Filter the screen to all registration orders you want to recalculate. 
   • Mandatory Filters:
     • Order Status - Exclude any Closed or Cancelled statuses since you cannot recalculate them.
     • Specific Event or Event Date (Start/End/Move In/Move Out) or Order Date
   • Optional Filters - Since the update may take a while for a large number of orders, you may want to add additional filters to reduce the number (e.g. by reducing the date time frame).
3. Select all registration orders to recalculate.
4. Right click and select Tools -> Recalculate Taxes. The Recalculate Taxes screen opens.
5. Enter the following information
   • Modify Tax Date - Check the check box.
   • Set Modified Tax Date - Select the date to use for tax calculation:
     • If your Tax Effective Date setup is based on event date (start, end, move-in or move-out), select the event date that matches your setup (Event Start Date, Event End Date, Event Move In Date or Event Move Out).
     • If your Tax Effective Date setup is based on order date, select Order Date. If you have an order entered prior to the new tax rate date but you still want to calculated it with the new tax rate, select Enter Date and provide a date past the new tax effective date in the Date field.
6. Click OK. The orders update with the correct tax.

Manage Credit Notes after Tax Rate Changes

• Issuing credit notes for payment plan final invoices as well as for non-payment plan invoices issued prior to the tax rate change require a manual adjustment. For example, adding a manual “tax correction” item on the order to account for the difference.
• Payment plans allow for crediting the last invoiced step only (before being able to credit the one prior to that and so forth). You may need to credit invoices with the new tax rate first before crediting a deposit invoice with the old tax rate.