How to Set up a Tax Transaction Code
The following article outlines the steps involved in setting up a new Tax Code in the PMS.
Step 1: GL Accounts
The first step to setting up a new Tax Code is to determine if the corresponding GL Account already exists in the PMS. If it does not, one will need to be added.
Go to System Configuration > Transaction Codes, and then proceed to the GL Accounts tab.
- If there is already a General Ledger Account that corresponds with the Tax Code you are about to create then you may skip ahead to Step 2
- If none of your pre-existing General Ledger Accounts correspond with the Tax Code you are about to create, then select the Add button to create a new General Ledger Account.
NOTE: You should never modify the name of a General Ledger Account (ie: changing A/R Guest to VISA). If you no longer need a General Ledger Account then simply uncheck the "Active" box to make the General Ledger Account inactive. Slight changes to the name is ok (ie: changing A/R Guest to Guest Ledger or changing A/R City to City Ledger)
If a new GL Account needs to be created, fill in the following information:
- Account Identifier – can be an abbreviated form of the General Account Name or the full name if desired (NOTE: If you are using an Accounting Export Interface such as Quickbooks then this should be the Quickbooks Account Number for the General Ledger Account you are Creating. This may also apply to any external accounting software package using numbered GL Accounts).
- Account Name – full name of the General Ledger Account
- Active – check this box to activate the General Ledger Account
- Receivable – The PMS only has 3 Receivable Accounts – A/R Guest, A/R City and Deposit Holdings. These are configured during the initial PMS setup. No other Receivable Accounts should ever be added.
Once complete, click OK to save.
Step 2: Taxes
Proceed to the Taxes tab. Select the Add button to add a new tax and fill in the following information:
- Description – insert name of the tax
- VAT – check this box if the tax is a Value Added Tax
Compound – checking this box indicates that this tax is a compounded tax
Example: My Room Charge Transaction Code has two taxes; GST at 7%, and PST at 6.5%
GST is set to Sort Order 1
PST is set to Sort Order 2, and the compound box is checked
For a $100 room charge, the calculation would be:
100 + (100 x 7%) = $107
107 + (107 x 6.5%) = $113.96
If the PST was not compounded, then the calculation would be:
100 + (100 x 7%) + (100 x 6.5%) = $113.50
- Rate – enter the amount of the tax
- Rate is percent – check this box if the rate is a percentage, leave unchecked if it is an amount
- Sort Order- defines the order in which the taxes will appear on a Guest Folio. Also used for compounded taxes to determine which tax is calculate first, second and so on.
Once all pertinent information is filled out, click Post to save.
Attaching the correct General Ledger Accounts
Once the Tax Transaction Code has been setup, the Accounts MUST be inputted.
- On the "Accounts" tab, ensure you have the correct Transaction Code selected at the top
- Click the Insert button to enter in the associated GL Accounts.
The purpose of this step is to provide the PMS with instructions on which GL Accounts to Credit and Debit, when a tax is posted to either the Guest Ledger, or the City Ledger.
- After you select Insert the Date From, Debit and CL Debit fields will automatically populate with the correct General Ledger Accounts. (Highlighted in green below).
- Click on the Credit box and a drop down menu will appear (highlighted in pink below). Select the corresponding GL Account for this Tax Code. The CL Credit will automatically populate with the same GL Account that was selected for Credit.
- The Date To field must be left blank (highlighted in orange)
In the example below, we are attaching our Sales Tax to it's own GL Account, also called Sales Tax. This One-To-One Tax Code to GL Account relationship is quite common, and will allow us to track the revenue generated by the Sales Tax Code on it's own. If a property does not have a pre-existing set of rules laid out by their Accounting Department regarding linking codes to GL Accounts, a One-To-One Code to GL Account method is recommended.
IMPORTANT NOTE: If the Debit/CL Debit populated with something other than "A/R Guest" and "A/R City" for a Tax Code, please contact Customer Support for assistance before proceeding or posting the code in the PMS.
4. Once done, click OK to save your selections.
Changing a Tax Rate
The Tax Rates tab is used to change the amount of a tax once it has been setup in the PMS. For more information regarding Tax Change Procedures please refer to the article called Tax Change Procedures.