Item Sales Tax Group Example

Item sales tax group is a standard feature in Microsoft Dynamics 365 for Finance and Operations. In Property Lease Management, the item sales group is applied to a lease through an item that is attached to a charge. This article provides some information on how to apply the item sales tax group to a lease in Property Lease Management.

In Microsoft Dynamics 365 for Finance and Operations, ensure you set up the following tax pages: 

• Sales tax codes (assigned to tax groups)
• Sales tax group (assigned to customer or vendor records)
• Item sales tax groups (assigned to item records)
• Sales tax authorities
• Sales tax settlement periods

Also, ensure that General Ledger parameters and other setup is completed. For detailed information on sales tax, review the following articles in the Microsoft Dynamics 365 for Finance and Operations documentation: 

• Sales tax overview
• Set up sales tax groups and item sales tax groups
• Sales tax payments and rounding rules
• Set up sales tax settlement periods

After the standard Microsoft Dynamics 365 for Finance and Operations setup is completed, ensure to set up the item tax group in Property Lease Management on the Properties and Charges pages. The order of priority for applying the item sales tax group is the following order: 

1. Property lowest level
2. Charge
3. Item

For a revenue and expense lease, when the invoice is created for the billing period, the tax code that is applied to a charge is the tax code that is present in both the sales tax group and the item sales tax group. Review the following example.

Example Tax Setup

In this example, the following fictional tax set up:

Sales tax code page, set up the following sales tax codes: 

• PLM_P_FULL (PLM Payables Full)
• PLM_P_ZERO (PLM Payables Zero Rate)
• PLM_S_FULL (PLM Sales Full)
• PLM_S_ZERO (PLM Sales Zero Rate)

Sales tax group page, add the following sales tax codes: 

• PLM_Payables has the PLM_P_FULL and PLM_P_ZERO tax codes.
• PLM_Sales has the PLM_S_FULL and PLM_S_ZERO tax codes

Item sales tax group page, add the following sales tax codes: 

• FULL has the PLM_P_FULL and PLM_S_FULL tax codes.
• ZERO has the PLM_P_ZERO and PLM_S_ZERO tax codes.

The Sales tax authorities and Sales tax settlement periods must also be set up for the general sales tax functionality.

When a customer is created, the PLM_Sales tax group is applied to the record (Invoice and Deliver FastTab).

Lease Setup and Invoice

In Property Lease Management, set up the following: 

1. On the Charges page, add a charge named Maintenance and set Item sales tax group to FULL.
   In this example, the item tax group is not set up on the Properties page.
2. Add a revenue or expense lease on the Lease Details page, add the Maintenance charge.
3. When using the Invoice Creator to created invoices the tax code that is applied to the invoice is the PLM_S_FULL tax code because this tax code is part of both sales tax groups.

After the invoice is created, the sales tax account that are used for a revenue lease differs from the account used for an expense lease. Also, any account substitution that occurs is based on the financial dimension setup.

• For a revenue lease, the sales tax account is used.
• For an expense lease, the charge account is used.

When abatement is used for a charge, the sales tax group that is applied to the abatement is the same as the charge to which the abatement applies.