Tracking Use Tax in Microsoft Dynamics GP

Written By: Gina Hoener

from October 19, 2012

Here’s a nice way to track use tax in GP. This method can be used for both payables and purchase order transactions.

There is a little-known field in the Company Setup Options window (Administration—Setup—Company—Company, click the Options button) that reads “Enable Reverse Charge Taxes”. Check this checkbox!

Now create a tax detail for the use tax %.  Assign the Use Tax Expense GL account number to this detail and enter the % as a positive number. Create a second tax detail for the same % but enter it as a negative %. Assign the Use Tax Liability GL account number to this second detail.

Create a Tax Schedule that uses both the tax details just created. Assign these two new tax details to your ALL DETAILS tax schedule (if you are using one). Then assign the new tax schedule to your vendor.

Enter a payables transaction. Make sure the shipping type is a PICKUP type. After you enter the Purchases amount and tab into the Tax field, you will see it stays at $0.00. Click the blue expansion arrow next to Tax and you will see your 2 tax details, and they offset each other.

Click the Distributions button and you’ll see a debit to your tax expense account and a credit to your liability account for the amount of the use tax! Perfect!

This method allows you to use the Company Tax reports for filing the use tax return. The vendor records show the true purchases amount and the GL captures the liability. When you are ready to pay the taxing authority just enter a payable transaction and debit the use tax liability account.

Easy peasy! J