DBD: AR - Credit Memo Sales Tax Only
DBD: Accounts Receivable - Credit Memo (Sales Tax Only)
🔵 Overview You may have a situation where a line on the invoice or the entire invoice should have been coded to a different taxing jurisdiction. This procedure allows you to create an internal credit for the tax amount only rather than having to enter a complete credit and re-bill.
Step-by-Step Instructions
- Go to Accounts Receivable, Invoice entry.
- Assign a new invoice number (this can be the next available invoice number, or if you would like to tie this adjustment to the same invoice, you can enter the same base invoice number and then use a letter in the 8th position such as -A or -T, for example 1234567-T). Do Not use the same invoice number as the original invoice that is being credited. You can reference the original order number if you wish for your own records.
- Enter your customer and ship-to code on the first screen of the invoice. If this is a summary bill client, you need to determine if this invoice should post to your summary bill report.
- For the line detail, you can use either a Non-Stock or special charge, and enter a negative quantity ordered. You will want the total extension on this line to be the total sell that needs to be credited. Then set the Sales Tax code on this line to the tax code you are crediting.
- Add a second line; you will use the same line type. This time you will enter a positive quantity and the total extension will be equal to the total net sell on the previous line. Set the Sales Tax Code field to the corrected sales tax code. You also have the option to set the taxable flag from Yes to No.
This procedure will create a credit invoice for only the tax amount. You will then need to offset this credit against the original invoice thru cash receipts.
This process will also make 2 postings on your sales tax payable report.
⚠️ CRITICAL UPDATE NOTE: This procedure cannot be used if you are processing your General Ledger on a Cash Basis. Will need to issue a complete credit and rebill.
Frequently Asked Questions
Q: When would I use this Sales Tax Only credit memo procedure?
A: When a line on the invoice, or the entire invoice, should have been coded to a different taxing jurisdiction — this lets you create an internal credit for just the tax amount instead of issuing a complete credit and re-billing.
Q: Should I use the original invoice number or a new one?
A: Assign a new invoice number. Do not use the same invoice number as the original invoice being credited — though you can tie it to the original by using the same base invoice number with a letter in the 8th position (for example, 1234567-T).
Q: How many lines do I need to enter, and what do they do?
A: Two lines. The first has a negative quantity with the total extension equal to the total sell being credited, using the sales tax code you're crediting. The second has a positive quantity with the total extension equal to the net sell on the first line, using the corrected sales tax code.
Q: What happens after I create this credit invoice?
A: You'll need to offset this credit against the original invoice through Cash Receipts. This process also makes 2 postings on your sales tax payable report.
Q: Can I use this procedure if my General Ledger is on a Cash Basis?
A: No — this procedure cannot be used if you are processing your General Ledger on a Cash Basis. You will need to issue a complete credit and rebill instead.
Tags: accounts-receivable, credit-memo, sales-tax, cash-receipts, DB-distributor