In IFS Cloud, the default tax code rates setup in Accounting Rules are used when calculating tax. In US, where many different tax codes exist and the rates change frequently, the standard solution is not adequate. The user does not want to change the rates manually every time the tax information has changed.
Vertex, Inc. is a recognized leader in state and local tax compliance and offers several software products in this niche. Vertex offers different software applications such as Vertex Sales Tax O Series which keeps track of valid tax information e.g. tax rates and performs tax calculations for the US and Canada markets. The solution is built as a subscription service, where tax information is updated instantly. This greatly simplifies the process of correctly calculating taxes for sales.
Vertex Sales Tax O Series is a cloud based application and the interface uses IFS Connect (xml files) to communicate with Vertex.
IFS has developed an integration for Vertex Sales Tax O Series, which allows the user to rely on Vertex for retrieval of correct tax information when doing tax calculations, without having to update any tax information manually. The integration is supported in following four areas in IFS (all other areas in IFS Cloud will continue using core functionality for calculating taxes):
The overall concept of the integration for Vertex is; when a tax call is initiated in IFS Cloud a call is made to the Vertex Sales Tax software to fetch the correct tax rates based on the information on the sales quotation, customer order, customer order invoice or the RMA. Three main parameters are used to identify the correct tax rates:
In addition to these main parameters, information such as sales part number, price, quantity and customer group are also passed to the Vertex Sales Tax software to ensure the correct tax rates are fetched. Based on the information sent to Vertex, Vertex looks up the correct tax rates and tax amounts and return the information to IFS Cloud. The information is then uploaded into the tax lines dialog. Tax lines dialog is read only when using Vertex meaning that it is not possible to manually add tax codes.
Note! Vertex Integration is only to be used for tax calculations in the US and Canada.
When utilizing a third-party tax software like Vertex to determine the correct tax rates for a transaction, tax rates can be divided into the following categories; State, County, District and City. Due to this, some initial set up is required in IFS Cloud when using the Vertex integration. Within Accounting Rules/Tax/Tax Codes, the user must create four generic tax codes to represent the four categories which the fetched tax rates can be divided into. Since the tax codes are generic, the Tax (%) should be set to zero and the Tax Type should be Tax. The Valid To date for the tax code should be set to a date in the future. Expired tax codes will prevent the system from fetching the correct tax rates from Vertex. Once the four tax codes have been created in the Tax Codes window, the tax codes should be associated with the Generic Tax Codes in Company/Tax Control/External Tax System tab.
The external tax calculation method, located in Company/Tax Control/External Tax System tab, must be selected to specify which third-party tax software that should be used to retrieve the appropriate tax rates. Possible values are Not Used or Vertex Sales Tax O Series. If Not Used is selected, CORE IFS logic is used to fetch the appropriate tax code, rate and amount. If the Vertex option is selected, the tax rates will be retrieved from Vertex for the four defined flows i.e. Sales Quotation, Customer Order, Customer Order Invoice and RMA.
If Refresh Tax Information at Release of Customer Order in the External Tax Systems tab is selected, a tax request will be sent to the external tax system to verify that correct tax rates and tax amounts are used on the customer order lines when the customer order is released. By default this option is selected so the tax information is refreshed when releasing the customer order. Some customers work for a long time with a customer order and in this case, it is good to check all taxes a final time when releasing the order. If a customer enters a customer order and release it in a near future there is no need to check the taxes a second time when releasing the order.
Vertex uses jurisdiction code to decide which tax rates to apply. Jurisdiction code is a general concept in US and Canada. Jurisdiction code is based on the address and different addresses have different jurisdiction codes. Since the address information is used to fetch the correct tax rates in Vertex, it is important that all addresses are entered correctly on both the company and the customer records.
When saving an address for a company or a customer and the address is entered correctly, IFS Cloud will communicate with the Vertex Sales Tax software to identify the correct jurisdiction code for the provided address and update this information into the Jurisdiction Code field on the Address page of the Company or Customer. When a jurisdiction code is returned we know that the address is valid. The jurisdiction code field is read only meaning that it is not possible to manually enter a jurisdiction code.
Within City Limit, if this is selected, the company or customer is located inside the city limits. This means that city sales tax is calculated. If this is unselected, the company is located outside the city limits, and no city sales tax is calculated. Within City Limit is only valid for Q series (Deprecated in 22R1).
Tax calculations are initiated during various events in the Sales Quotation, Customer Order, Customer Order Invoice and RMA flows. When initiated, the system will use the External Tax Calculation Method value on the company record to determine from where the tax codes and tax rates should be fetched.
The prerequisites in order for IFS Cloud to communicate with Vertex is that the tax liability on the customer address is set to TAX and the sales part is taxable. IFS Cloud does not communicate with Vertex if the tax liability on the customer address is set to EXEMPT or when the sales part is not taxable. When the tax liability is set to EXEMPT or when the sales part is not taxable the tax lines dialog will be empty.
For Sales Quotation a new tax calculation is initiated resulting in new tax request being sent to Vertex under the following circumstances:
The Quotation Line Tax Lines dialog will be updated with the data received from Vertex.
For Customer Order a new tax calculation is initiated resulting in new tax requests being sent to Vertex under the following circumstances:
The Customer Order Line Tax Lines dialog will be updated with the data received from Vertex.
For Customer Order Invoice a new tax calculation is initiated resulting in new tax request being sent to Vertex under the following circumstances below:
The Customer Order Invoice Tax Lines dialog will be updated with the data received from Vertex. The final tax calculation is initiated at time of printing the customer order invoice. As part of this final tax calculation the invoice lines are also written to the Vertex Tax Registry. Vertex Tax Registry can be used as a tax ledger.
Return Material Authorizations can either be created manually or automatically from the customer order line(s).
When created manually, the sales tax calculation is initiated when a new RMA line or RMA Charge line is added to the RMA. The RMA Line Tax Lines dialog or the RMA Charge Tax Lines dialog will be updated with the data received from Vertex.
When created automatically, the system copies the tax lines from the customer order line(s) and/or the customer order charge line(s) and adds this information to the RMA Line Tax Lines dialog or the RMA Charge Tax Lines dialog.
For Return Material Authorization a new tax calculation is initiated resulting in new tax request being sent to Vertex under the following circumstances:
In the page External Tax System Parameters, the user enters login information to Vertex for the O Series. The user can login using User Name and Password or by using a Trusted ID that is provided by Vertex.
In External Tax System Parameters, there is also a field for Version. The user needs to enter which version of the O Series they are using. The versions currently supported by IFS are displayed in the list.
External Tax System Parameters is a company independent window meaning the information is valid for all companies in the installation that are using the O Series
In order to communicate with the Vertex Sales Tax O Series software, three routing addresses must be added in IFS Connect/Routing Addresses:
In the page ISO Code Usage/Country there is a option for Fetch Jurisdiction Code. This needs to be enabled in order for Vertex integration to work. If this is enabled for a country code, the jurisdiction code for customer's and company's addresses will be fetched when the Vertex integration is used.