Ryan Muller
Accounting for Sales Tax in Supplier Invoice entry
Ryan Muller · 10 months ago · Discussion
Ryan Muller
Accounting for Sales Tax in Supplier Invoice entry

The question came up recently how to properly account for sales tax on our Supplier Invoices entered by AP. These are mostly for new store construction costs across the country where we're building stores across the US and I would imagine others are trying to account for this as well across the multiple tax jurisdictions, etc.

Currently our AP team is entering the invoice totals by associated GL account including the tax.

As an example we get an invoice for the construction of our 500th store in Washington from a kitchen equipment company for an oven, walk in freezer and fridge and some coolers that would look like this on paper:

Qty Description Item Price Total Price
1 Pizza Oven $17,500 $17,500
1 Walk in Freezer $10,000 $10,000
1 Walk in Refrigerator $10,000 $10,000
2 Drink Coolers $2,000 $4,000
    Sales Tax (10.6%)

$4,399

    Grand Total $45,899

Entered into SAP right now AP is entering the lines like this, where you can see the sales tax is just rolled up into the GL account totals:

Debit/Credit GL Account Amount Cost Center
Debit 18005000  CIP - Oven $19,355 USD WA20500
Debit 18006000  CIP - Kitchen Equip $26,544 USD WA20500

Our Tax Director and Controller want to keep better track of our sales (and use tax) to prove we're paying appropriately. Here is the current way we've proposed doing this in an invoice (based on the same example data above), is there a better way?

Debit/Credit GL Account Amount Cost Center Item Text
Debit 18005000  CIP - Oven $17,500 USD WA20500  
Debit 18005000  CIP - Oven $1,855 USD WA20500 Sales Tax
Debit 18006000  CIP - Kitchen Equip $24,000 USD WA20500  
Debit 18006000  CIP - Kitchen Equip $2,544 USD WA20500 Sales Tax

We do have Vertex connected to our S/4HC system because it was mandated at the time we went live but we don't actively use it and I also wonder how that plays into this discussion.

Thanks,

Ryan 

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