Tax Liability
Some states require taxes to be paid at the time of the delivery, rather than payment. This means that tax figures reported at the end of a fiscal period must include tax only on papers that have been delivered. The Tax Liability Report can assist in reporting these “earned” taxes. It lists each subscriber’s earned tax and remaining tax liability (unearned tax) for the reporting period, in a manner similar to the Unearned Revenue Report. Tax exempt subscribers can also be listed. If run in update mode, earned taxes will be recalculated, and if Create GL is selected, GL entries will be made.
In order to “earn” taxes, a tax authority must be set up to remit taxes on delivery—see Tax Authority Publication in the Setup Manual for more information.
To create the Tax Liability Report and update earned tax information:
Select Tax Liability from the Taxing menu to display the Tax Liability window.
Click Add and complete the following fields.
Field Type What to enter ALL ACCOUNTS
yes/no
Indicate whether earned tax should be reported and updated for all subscribers of a publication. If you do not select this checkbox, you specify subscribers to include based on product and subscription ID ranges entered in the Account Ranges Entry window (which opens after the Tax Liability fields have been entered).
If only certain accounts should be included, leave this box unchecked and click the Account Ranges Entry button to the right of the field to manually specify the subscribers to be included.
PRODUCT
setup
If All Accounts is selected, enter the product for which to run the report.
START DATE, END DATE
date
Enter a date range for the report. The report lists taxes earned within this date range. If the date range includes unpublished days, the report will estimate the (unearned) tax amount for the undelivered days.
REPORT TYPE
predefined
Indicate whether the report should list earned tax for individual subscribers (“Detail”) or only totals for distribution methods and publication (“Summary”).
UPDATE
yes/no
Indicate whether earned tax information should be updated (the updated earned tax becomes the “Prior Tax Liability” the next time you compile the report). If earned taxes have not been updated through the day prior to the start date, “Prior Tax Liability” will be zero.
CREATE GL
yes/no
If earned tax information is being updated, indicate whether earned General Ledger entries should be posted. See GL entries for taxing for more information on taxing GL entries. Note: The first time you run the Tax Liability report in update mode, do not select this checkbox. Liability records need to already exist in order to calculate the GL entries.
PRINT EXEMPT LIST
yes/no
Indicate whether subscribers that are tax exempt should be listed at the end of the report.
Click OK and then Continue to update earned tax information and create the report. A sample report is shown below, and the following table describes the report columns.
Example—Tax Liability Report
The columns on the Grace Due report are described below.
| Column | Definition |
|---|---|
Account, Name | The subscription ID and name are printed in these columns. |
Entity | The subscriber’s tax authority prints here. If the subscriber is taxed under more than one tax authority, a separate line will be printed for each tax authority. |
Prior Tax Liability | The subscriber’s previous unearned tax (i.e., the tax amount that has not been delivered yet) appears in this column. Note that the prior tax liability will be zero unless the Tax Liability report was previously run in update mode with an end date one day before the start date of the current report. |
Payments | If the subscriber has made a payment during this period, the taxes deducted from the payment will be listed here. This column also includes tax for cash payment adjustments, NSF payments and canceled payments. |
Transaction Activity | If the subscriber’s balance was adjusted by move or transfer transactions during this period, the tax impact will be listed here. |
Grace | If the subscriber had grace owed or grace written off during this period, the tax on the grace will be listed here. |
Refund | If the subscriber had a refund or refund written off during this period, the tax on the refund amount will be listed here. |
Earned Tax | The “earned tax” (tax on papers delivered) for this period will appear in this column. This will be:
|
Current Tax Liability | The tax collected during this period (from payments, etc.) but not earned appears in this column. This is calculated by multiplying the number of remaining copies by the average tax copy rate or (if the subscriber rate varies by day) by the copy rates by day. |
GL Entries for Subscriber Taxing
The diagram below illustrates the GL entries for taxing. Tax entries are made for a payment (or transfer in), for grace owed, and during grace writeoff:
Payment or transfer in. Unless a tax authority remits on delivery, the only GL entries will occur during Payment Processing, when Cash in Bank is debited and Tax Collection is credited. If the tax authority does remit on delivery, tax monies will move from Tax Collection to Earned Tax when the Tax Liability report is run. If the tax authority allows delivery costs to be exempted, that amount will move from Earned Tax to Subscriber Revenue; this happens when the Transportation Exclusion report is run. However, if the cost of the subscription is less than the delivery fee, the difference must be posted back to Tax Collection (when the Tax Exclusion report is run).
Grace owed. Grace owed will be taxed only if the tax authority remits on delivery. When the grace owed is created (during Transaction Processing or when the Grace Due report is run), Subscriber AR will be debited and Tax Collection will be credited for the tax amount. This tax will be earned the next time the Tax Liability report is run. As with a payment, the delivery cost can be exempted from the tax. If a payment then arrives and the grace owed is paid, there will be GL entries only for the payment portion—the tax has already been recognized.
Grace writeoff. If a grace owed transaction is written off, any tax (minus any transportation exclusion) will move from Earned Tax to Subscriber AR. The transportation exclusion, if any, will move from Subscriber Revenue to Subscriber AR.
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