Conditional sales tax indicates that sales tax should only be paid proportionally to the actual amount paid on the invoice, as opposed to standard sales tax which is reported upon invoicing time.
Conditional sales tax has to be paid to the sales tax authority at the payment posting and not at invoice posting. At invoicing, the transaction has to be reported in the sales tax book report, but it has to be excluded from the sales tax payment report.
The parameter also ensures that no sales taxes can be deducted unless you have actually paid the invoice. This is a legal demand in some countries.
Example
Suppose that you settle sales taxes every month.
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On June 15th, you create an invoice of EUR 10 million plus sales tax.
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The sales tax in this case is 25% or EUR 2.5 million.
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The terms of payment are current month + 30 days so the due date is July 30th.
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The next time you settle your sales taxes is on July 10th.
Normally you would have to settle and pay the EUR 2.5 million to the tax authorities.
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You only get your money from the customer on July 30th, so if your liquidity is low, you have to borrow money to settle your taxes.
Note
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When selecting the parameter you need to set up sales tax codes, sales tax groups, and create ledger posting groups to support the functionality. For additional information, see Set up conditional sales taxes. |
