VAT
Prism supports using either Sales Tax or VAT as the tax method. When using VAT, the Price with Tax field displays the amount charged to the customer for the item. When you initialize the Prism server, tax areas and tax (VAT) rates are copied from RIL Oracle server to Prism.
Display of Prices
If using VAT, the Price field in RP Prism shows the Price with Tax, just like in Retail Pro 9. There is not a separate Price with Tax field on the Prism transaction form. In RIL Prism Management, when viewing Inventory and using VAT, both the Price and Price with Tax fields display the price with tax. Inventory grid formats in Prism currently only can display the Price (no Price with Tax field). This is a known issue.
VAT-Related Preferences in Prism
Node Preferences > Taxes > General: Select VAT as the Tax Method. When VAT is selected as the tax method, documents use the Price with Tax fields. Note: The Detax and Tax Rebate features are only available when using VAT.
| Preference | Description |
|---|---|
| Tax Method | Select the sales tax method used by the Subsidiary. Sales Tax: (default) Typical sales tax environment (e.g. U.S.) VAT: Value Added Tax environment. (For example, Europe.) ICM: VAT variation used in certain countries such as Brazil. Sales Tax: Multi Sales Tax environment (e.g., Canada) |
| Include 1st Tax when calculating 2nd Tax on Price | If selected, the 1st price will be included when calculating a 2nd tax on price. This is for tax areas where two sales taxes are applied to retail sales, sometimes separately, sometimes combined. |
| Multi-Tax VAT | This preference is for retailers operating in a VAT environment but in which there are multiple taxes applied. If you are a retailer operating in a multi-VAT environment, select the Multi-Tax VAT checkbox. Note: If you are a retailer operating in a state such as Kerala where the additional tax is calculated off the first tax, also select the Calculate Tax 2 from Tax 1 checkbox. |
| Calculate Tax 2 from Tax 1 | Note: This option is currently only needed by retailers operating in certain specific regions, such as Kerala, India. The state of Kerala has a tax system that adds an additional tax that is calculated off of the first VAT tax. Tax2$=Tax1$*Tax2% Then Tax1$ and Tax2$ are added to the item price. P$T$= P$+(T1$+T2$) |
Sales Tax Multi
The Sales Tax-Multi method is used when you must apply two sales taxes to sales, such as when:
- You must collect, report, and pay sales taxes separately to two taxing authorities.
- You must collect one tax for the entire amount of a sale, and a second tax for the portion of the sale that exceeds a threshold amount.
- You must collect two taxes where the first tax is applied to the sale price; and then the second tax is applied to the sale price plus the first tax.
Note: There are separate settings for applying multiple taxes in a VAT environment. See the section on VAT.
Sample Uses of Multiple Sales Taxes
A federal sales tax and a provincial/state sales tax
Each tax must be reported and paid to a separate taxing authority. Set up a Federal tax area and a provincial/state tax area, assign both tax areas to your stores. When an item is sold, both taxes will be applied and can be tracked and reported separately.
Sales tax on food at the local level but not at the state level.
Other items may be taxed at both levels. Define and assign to all food items a unique tax code, define a local tax area with the applicable tax rate and a state tax area with a 0% tax for the food code, assign both tax areas to your stores. When a food item is sold both taxes will be collected, but since it is 0% for the state tax, only the applicable local tax will be charged the customer.
Normal 8.0% sales tax on the full purchase price of boats you sell, plus an additional 5.0% tax on the portion of the sales price that exceeds $20,000.
Set up two tax areas, one could be called "Sales Tax" that applies to the entire purchase price, and the second called "Affluence Tax" (or similar) for the tax that applies to the amount over $20,000. Set the "At/Above" threshold amount of $20,000 for the second tax area when setting it up. A boat sold for $25,000 would be taxed a total of $2,250. Tax = ($25,000 x .08) + ($5,000 x .05) = $2,250.
Extra Tax Fields for Multiple Sales Taxes
When using Sales Tax - Multi as your tax method, additional fields are available. The Tax Area 2, Tax 2 % and Tax 2 $ fields are available in inventory, receipts, and sales orders. Each item's total tax (Tax $ + Tax 2 $) is stored in the Total Tax $ field.
VAT Margin
Preferences & Settings > Taxes > Tax Areas: VAT Margin
The VAT Margin option is designed for retailers in certain environments where tax and margin must be calculated in a different way than standard VAT. For example, using the VAT Margin option enables retailers in the UK who sell secondhand items purchased from a non-VAT supplier (e.g. when a customer sells used clothes or tools to the retailer) to comply with UK tax laws for such sales.
VAT Margin can be applied to individual Tax Codes within a single Tax Area. This means that users can both:
- Apply normal VAT for the sale of new items purchased from VAT vendors/suppliers.
- Apply VAT Margin for the sale of secondhand items purchased from non-VAT vendors.
VAT Margin Calculation
Normally with VAT you have a fixed sale price, a fixed VAT percentage and then calculate the price without tax from that P$ = P$T$ / (100%+Tax %). If the "VAT Margin" option is selected in Prism Node Preferences > Taxes > Tax Areas, Prism will use the following calculation: Tax$ = P$T$ - P$ OR Tax$ = P$T$ * Tax% / (100%+Tax %).
To set the VAT Margin flag:
- Navigate to Preferences & Settings > Tax Areas.
- Select a Tax Area.
- In the Tax Rules area, select the VAT Margin check box for individual tax codes as needed.
- Repeat for other tax areas as needed and then save.
Spread Transaction Discounts
When using the VAT Margin feature, be sure to always spread transaction-level discounts. Spread transaction-level discounts distributes the discount among the individual items. If you don't spread transaction-level discounts, discrepancies in margin values may result.
VAT Margin for Sale of secondhand goods
The retailer does not pay VAT when purchasing these items from individuals; therefore, the retailer is not entitled to claim full tax in the standard manner. For items sold secondhand, VAT is only eligible on the gross margin earned. In this example a customer sells a second-hand item to the retailer for 60. This is the Cost of Item. The retailer assigns a price of 110 to the item; however, because this is a second-hand item, the retailer cannot apply the VAT rate of 20% to the full price of the item. The retailer can only apply the difference between the Price (110) and the Cost (60). This results in a VAT amount of 10, which is added to the Price to achieve a Gross Selling Price of 120. This makes the effective VAT rate 9%.