VAT vs Sales Tax again and again

[Jacopo Cappellato]

Hi,

we have already discussed many times about the best way to implement VAT
taxes in OFBiz.
I did some research recently and I've found this page very interesting:

http://en.wikipedia.org/wiki/Value_added_tax

The most interesting aspect, in my opinion, is that, apart from the
differences in the way taxes in general are shown to the customers (e.g.
price with/without tax, as total or per item etc...), that, by the way
are very industry/country specific (and not really related to VAT), the
fundamental difference appears to be the following one:

"Sales taxes are normally only charged on final sales to consumers.
VAT differs from a conventional sales tax in that VAT is levied on every
business as a fraction of the price of each taxable sale they make, but
they are in turn reimbursed VAT on their purchases, so the VAT is
applied to the value added to the goods at each stage of production."

The "Example" paragraph illustrates very well the difference.

Moving these concepts to OFBiz:

Sales Tax:
* tax is computed and collected only for sales orders
* a (monthly) report summarizes the tax collected from customers (i.e
due to the Governemnt)

VAT:
* tax is computed and collected only for sales orders (OK)
* tax should be computed and paid also for purchase orders
* a (monthly) report summarizes the tax collected from customers and the
tax paid to suppliers: the difference is the amount due to the Governemnt

That said, in order to implement VAT tax in OFBiz we could:
1) add a flag to mark the tax as "VAT Tax" (and distinguish it from
sales tax)
2) implement automatic tax calculation for purchase orders
3) implement the monthly report that filters taxes by the flag in point
1 and shows the difference as described above

This doesn't seem very complex; what do you think?

Jacopo

[hans_bakker]

Hi Jacopo,

I had my Dutch company on a simple version of the ofbiz accounting
system (no ledger) and this is exactly what i did. Separate the outgoing
and incoming VAT from the purchase/sales invoice (invoiceItemType) and
pay the difference to the taxman. These payments to the taxman should be
considered as 100% 'outgoing' VAT so that a balance can be kept...  

.....however....I only know the case in the Netherlands....

Here it is required to pay the VAT to the taxman monthly on invoices
which have been sent out and received. It can however be that the sales
invoice is not paid yet, but the tax needs to be paid....and with a 19%
vat it can make cashflow problems...

But that is no problem for the system.....so your explanation sounds
good to me.

Regards,
Hans


On Tue, 2008-02-05 at 07:26 +0100, Jacopo Cappellato wrote:

> Hi,
>
> we have already discussed many times about the best way to implement VAT
> taxes in OFBiz.
> I did some research recently and I've found this page very interesting:
>
> http://en.wikipedia.org/wiki/Value_added_tax
>
> The most interesting aspect, in my opinion, is that, apart from the
> differences in the way taxes in general are shown to the customers (e.g.
> price with/without tax, as total or per item etc...), that, by the way
> are very industry/country specific (and not really related to VAT), the
> fundamental difference appears to be the following one:
>
> "Sales taxes are normally only charged on final sales to consumers.
> VAT differs from a conventional sales tax in that VAT is levied on every
> business as a fraction of the price of each taxable sale they make, but
> they are in turn reimbursed VAT on their purchases, so the VAT is
> applied to the value added to the goods at each stage of production."
>
> The "Example" paragraph illustrates very well the difference.
>
> Moving these concepts to OFBiz:
>
> Sales Tax:
> * tax is computed and collected only for sales orders
> * a (monthly) report summarizes the tax collected from customers (i.e
> due to the Governemnt)
>
> VAT:
> * tax is computed and collected only for sales orders (OK)
> * tax should be computed and paid also for purchase orders
> * a (monthly) report summarizes the tax collected from customers and the
> tax paid to suppliers: the difference is the amount due to the Governemnt
>
> That said, in order to implement VAT tax in OFBiz we could:
> 1) add a flag to mark the tax as "VAT Tax" (and distinguish it from
> sales tax)
> 2) implement automatic tax calculation for purchase orders
> 3) implement the monthly report that filters taxes by the flag in point
> 1 and shows the difference as described above
>
> This doesn't seem very complex; what do you think?
>
> Jacopo
>
>

--
AntWebsystems.com: Quality OFBiz services for competitive rates.....

[hans_bakker]

One other remark on VAT, VAT is only required for national sales,
international sales have no VAT, even within the EEC.

So if you have only customers outside your own country, you normally get
your VAT paid on purchase orders back from the taxman.


Regards,
Hans

On Tue, 2008-02-05 at 07:26 +0100, Jacopo Cappellato wrote:

> Hi,
>
> we have already discussed many times about the best way to implement VAT
> taxes in OFBiz.
> I did some research recently and I've found this page very interesting:
>
> http://en.wikipedia.org/wiki/Value_added_tax
>
> The most interesting aspect, in my opinion, is that, apart from the
> differences in the way taxes in general are shown to the customers (e.g.
> price with/without tax, as total or per item etc...), that, by the way
> are very industry/country specific (and not really related to VAT), the
> fundamental difference appears to be the following one:
>
> "Sales taxes are normally only charged on final sales to consumers.
> VAT differs from a conventional sales tax in that VAT is levied on every
> business as a fraction of the price of each taxable sale they make, but
> they are in turn reimbursed VAT on their purchases, so the VAT is
> applied to the value added to the goods at each stage of production."
>
> The "Example" paragraph illustrates very well the difference.
>
> Moving these concepts to OFBiz:
>
> Sales Tax:
> * tax is computed and collected only for sales orders
> * a (monthly) report summarizes the tax collected from customers (i.e
> due to the Governemnt)
>
> VAT:
> * tax is computed and collected only for sales orders (OK)
> * tax should be computed and paid also for purchase orders
> * a (monthly) report summarizes the tax collected from customers and the
> tax paid to suppliers: the difference is the amount due to the Governemnt
>
> That said, in order to implement VAT tax in OFBiz we could:
> 1) add a flag to mark the tax as "VAT Tax" (and distinguish it from
> sales tax)
> 2) implement automatic tax calculation for purchase orders
> 3) implement the monthly report that filters taxes by the flag in point
> 1 and shows the difference as described above
>
> This doesn't seem very complex; what do you think?
>
> Jacopo
>
>

--
AntWebsystems.com: Quality OFBiz services for competitive rates.....

[Jacopo Cappellato]

Hans Bakker wrote:

> Hi Jacopo,
>
> I had my Dutch company on a simple version of the ofbiz accounting
> system (no ledger) and this is exactly what i did. Separate the outgoing
> and incoming VAT from the purchase/sales invoice (invoiceItemType) and
> pay the difference to the taxman. These payments to the taxman should be
> considered as 100% 'outgoing' VAT so that a balance can be kept...  
>
> .....however....I only know the case in the Netherlands....
>
> Here it is required to pay the VAT to the taxman monthly on invoices
> which have been sent out and received. It can however be that the sales
> invoice is not paid yet, but the tax needs to be paid....and with a 19%
> vat it can make cashflow problems...
>

The same in Italy: you pay the taxes every month but your customers pay
the invoices usually after 30 days (and sometime 60 or 90)... annoying :-(

Jacopo

> But that is no problem for the system.....so your explanation sounds
> good to me.
>
> Regards,
> Hans
>

[Jacopo Cappellato]

Hans Bakker wrote:
> One other remark on VAT, VAT is only required for national sales,
> international sales have no VAT, even within the EEC.
>

 From a tech point of view, this is not different from the current sales
tax implementation: you can easily setup geo rules for the applicability
of tax rates.

Jacopo

> So if you have only customers outside your own country, you normally get
> your VAT paid on purchase orders back from the taxman.
>
>
> Regards,
> Hans
>
> On Tue, 2008-02-05 at 07:26 +0100, Jacopo Cappellato wrote:
>> Hi,
>>
>> we have already discussed many times about the best way to implement VAT
>> taxes in OFBiz.
>> I did some research recently and I've found this page very interesting:
>>
>> http://en.wikipedia.org/wiki/Value_added_tax
>>
>> The most interesting aspect, in my opinion, is that, apart from the
>> differences in the way taxes in general are shown to the customers (e.g.
>> price with/without tax, as total or per item etc...), that, by the way
>> are very industry/country specific (and not really related to VAT), the
>> fundamental difference appears to be the following one:
>>
>> "Sales taxes are normally only charged on final sales to consumers.
>> VAT differs from a conventional sales tax in that VAT is levied on every
>> business as a fraction of the price of each taxable sale they make, but
>> they are in turn reimbursed VAT on their purchases, so the VAT is
>> applied to the value added to the goods at each stage of production."
>>
>> The "Example" paragraph illustrates very well the difference.
>>
>> Moving these concepts to OFBiz:
>>
>> Sales Tax:
>> * tax is computed and collected only for sales orders
>> * a (monthly) report summarizes the tax collected from customers (i.e
>> due to the Governemnt)
>>
>> VAT:
>> * tax is computed and collected only for sales orders (OK)
>> * tax should be computed and paid also for purchase orders
>> * a (monthly) report summarizes the tax collected from customers and the
>> tax paid to suppliers: the difference is the amount due to the Governemnt
>>
>> That said, in order to implement VAT tax in OFBiz we could:
>> 1) add a flag to mark the tax as "VAT Tax" (and distinguish it from
>> sales tax)
>> 2) implement automatic tax calculation for purchase orders
>> 3) implement the monthly report that filters taxes by the flag in point
>> 1 and shows the difference as described above
>>
>> This doesn't seem very complex; what do you think?
>>
>> Jacopo
>>
>>

[Jacques Le Roux]

From: "Jacopo Cappellato" <[hidden email]>

> Hans Bakker wrote:
>> Hi Jacopo,
>>
>> I had my Dutch company on a simple version of the ofbiz accounting
>> system (no ledger) and this is exactly what i did. Separate the outgoing
>> and incoming VAT from the purchase/sales invoice (invoiceItemType) and
>> pay the difference to the taxman. These payments to the taxman should be
>> considered as 100% 'outgoing' VAT so that a balance can be kept...  .....however....I only know the case in the Netherlands....
>>
>> Here it is required to pay the VAT to the taxman monthly on invoices
>> which have been sent out and received. It can however be that the sales
>> invoice is not paid yet, but the tax needs to be paid....and with a 19%
>> vat it can make cashflow problems...
>>
>
> The same in Italy: you pay the taxes every month but your customers pay the invoices usually after 30 days (and sometime 60 or
> 90)... annoying :-(
>
> Jacopo
>
>> But that is no problem for the system.....so your explanation sounds
>> good to me.
>>
>> Regards,
>> Hans

Hi Jacopo, Hans,

I mostly agree with this and Jacopo's premise.

Of course there are always specificities everywhere.
For instance as I'm working as an independant
  . I don't have to have a double-entry bookkeeping. So I'm allowed to register invoices only when they are paid.
  . Moreover when I began my activity (in 2000) I negotiated with my fiscal admistration the right to pay only every quarters.

Jacopo you say
>The most interesting aspect, in my opinion, is that, apart from the differences in the way taxes in general are shown to the
>customers (e.g. price with/without tax, as total or per item etc...), that, by the way are very industry/country specific (and not
>really related to VAT), the fundamental difference appears to be the following one:

I agree that it's not fundamental . But I think that this is where we could do some work at least on the price with/without tax
aspect. Since it seems that (at least) some users are really interested by this. Of course it's easy to say and even if I'm still
interested by this, I did not find the time (priority) to even answer to David Garrett's  and Marco's and propositions (respectively
https://issues.apache.org/jira/browse/OFBIZ-416 and https://issues.apache.org/jira/browse/OFBIZ-1262 ). Does not mean that I
forgot...

Jacques

[Enrique Ruibal]

Excelent analysis Jacopo, I'd like to add further add to your comments,
that in Mexico's case all the previous steps you mentioned are performed
by the accountant to file in the monthly VAT report for the tax
authority, furthermore it is required to discount the actual VAT paid
and/or charged by each Company against its own bank records.

I'll give you a little example how it works:

1) VAT from purchase orders:
$100 -> goes to credit VAT account i.e. 15100 (asset) from purchases to
suppliers

Less, VAT actually paid to suppliers during closing period (after bank
account reconciliation)
$40 -> goes to VAT actually credited account i.e. 15200 (asset)

After deducting the VAT actually credited against the credit VAT account
$100 - $40, company ends up with:
$60 -> Net remaining in credited VAT account i.e. 15100 (asset)

2) NOW, lets look at how VAT works in sales:
$80 -> goes to payable VAT account i.e. 21100 (liability) from invoices
issued to customers from sales

VAT actually enterd from invoices collected (after bank account
reconciliation)
$40 -> goes to VAT actually collected account i.e. 21200 (liability)

Remaining payable VAT $80 - $40:
$40


3) In order for the accountant to fill out the VAT monthly report,
he/she need to declare the NET VAT amount i.e.:

Net amount credit VAT: $60

less net amount payable VAT $40

Then the accountant declares a net credit VAT of $20, otherwise he/she
would have to issue a check to the tax authority in case the VAT payabla
net amount is greater than the Net credit amount.

So, to sum up it will great for ofbiz to provide furhter VAT management
functionallity as you propose and also it woul be great to include such
a report like the one I described, however it needs a good bank account
reconciliation procedures.

I have worked with these functionalities in other ERP systems before,
I'd be happy to contribute with documentation adn testing and some
development shall you decide to pursue these efforts and integrate the
into Ofbiz.

Regards,

Enrique

Jacopo Cappellato wrote:

> Hi,
>
> we have already discussed many times about the best way to implement
> VAT taxes in OFBiz.
> I did some research recently and I've found this page very interesting:
>
> http://en.wikipedia.org/wiki/Value_added_tax
>
> The most interesting aspect, in my opinion, is that, apart from the
> differences in the way taxes in general are shown to the customers
> (e.g. price with/without tax, as total or per item etc...), that, by
> the way are very industry/country specific (and not really related to
> VAT), the fundamental difference appears to be the following one:
>
> "Sales taxes are normally only charged on final sales to consumers.
> VAT differs from a conventional sales tax in that VAT is levied on
> every business as a fraction of the price of each taxable sale they
> make, but they are in turn reimbursed VAT on their purchases, so the
> VAT is applied to the value added to the goods at each stage of
> production."
>
> The "Example" paragraph illustrates very well the difference.
>
> Moving these concepts to OFBiz:
>
> Sales Tax:
> * tax is computed and collected only for sales orders
> * a (monthly) report summarizes the tax collected from customers (i.e
> due to the Governemnt)
>
> VAT:
> * tax is computed and collected only for sales orders (OK)
> * tax should be computed and paid also for purchase orders
> * a (monthly) report summarizes the tax collected from customers and
> the tax paid to suppliers: the difference is the amount due to the
> Governemnt
>
> That said, in order to implement VAT tax in OFBiz we could:
> 1) add a flag to mark the tax as "VAT Tax" (and distinguish it from
> sales tax)
> 2) implement automatic tax calculation for purchase orders
> 3) implement the monthly report that filters taxes by the flag in
> point 1 and shows the difference as described above
>
> This doesn't seem very complex; what do you think?
>
> Jacopo
>

[Jacques Le Roux]

Hi Jacopo, Hans, All,

From: "Jacopo Cappellato" <[hidden email]>

> Hans Bakker wrote:
>> One other remark on VAT, VAT is only required for national sales,
>> international sales have no VAT, even within the EEC.
>>
>
> From a tech point of view, this is not different from the current sales tax implementation: you can easily setup geo rules for the
> applicability of tax rates.
>
> Jacopo
>
>> So if you have only customers outside your own country, you normally get
>> your VAT paid on purchase orders back from the taxman.
>>
>>
>> Regards,
>> Hans

There other specificities if you are not paid in your country money (you should avoit it ;o)

In France, for instance, there are 2 cases (but I suppose these are common and global practices).

1 . If you use a double entries accounting you are allowed to issue invoices in a foreign  money. You must then convert the paiment
in your money at the date of paiment. The difference between the registered credit and the received paiment must be counted in "gain
or loss of change".At end of exercice you must convert the account in foreign money to your money at the date of the balance. The
difference between accounting and conversion must be registered in "gain or loss of change".
If an invoice has been registered in this exercice and the paiment in another money is in the next exercice there is a difference
between accounting and fiscal paiments since you must convet the the credit at the end of the exercice. If it's a plus you must
credit  a specific account (477 - "écart de conversion passif" in french). This value must be reintegrated from a fiscal view. If
it's a minus you must create provision for change loss, which is not  fiscally deductible. And you must debit a specific account
(476 - "écart de conversion actif" in french) which is fiscally deductible.

2. If you use a simple accounting (collections and disbursements, as an independent for instance) you must issue invoices in your
own money. At end of exercice you must convert the account in foreign money you received into your money at the date of the balance.
The difference between accounting and conversion must be registered in gain or loss of change.

Actually I'm just discovering all that :(and I should know and care, by chance I'm only concerned by the 2d case :o)

Jacques

[David E Jones]

On Feb 4, 2008, at 11:26 PM, Jacopo Cappellato wrote:

> * tax should be computed and paid also for purchase orders

...

> 2) implement automatic tax calculation for purchase orders

With sales tax in the USA the selling party is responsible for  
collecting tax on behalf of the government (city, county, state, or  
federal). Is that also the case with VAT? My guess is that it is, but  
I'm not sure.

The reason I'm thinking about this is there is a reason we don't  
calculate tax for purchase orders: it is the responsibility of the  
vendor to calculate that tax and tell the purchaser what the tax  
liabilities are.

-David

[Enrique Ruibal]

I think weather or not VAT is calculated on a document depends as to how it is defined under the product properties, as such I have seen in other ERP systems. As for Ofbiz in particular I noticed there is a TAX VAT code field in product table..so shouldn't this be used to determine weather VAT is going to be calculated on the sale or purchase order and also to wich rate should this be calculated?

David E Jones wrote

On Feb 4, 2008, at 11:26 PM, Jacopo Cappellato wrote: > * tax should be computed and paid also for purchase orders ... > 2) implement automatic tax calculation for purchase orders With sales tax in the USA the selling party is responsible for collecting tax on behalf of the government (city, county, state, or federal). Is that also the case with VAT? My guess is that it is, but I'm not sure. The reason I'm thinking about this is there is a reason we don't calculate tax for purchase orders: it is the responsibility of the vendor to calculate that tax and tell the purchaser what the tax liabilities are. -David

If I did not remember wrongly in Italy a company has to collect all the Sales Tax and Purchase Tax and pay to the government the difference between those two amounts.
In my opinion the VAT tax has to be calculated and shown (with tax included or excluded) at Order Item level because is it possible that for a order item we will have different tax rates or tax exemption (tax rate = 0).
For example if a stationer sell two differents products like that:

Order Item 1   Newspaper        Price € 1,00 Tax € 0,00* Total € 1,00
Order Item 2   Book Accounting Best Practices   Price € 15,00 Tax € 3,00 Total € 18,00

Order Total
Tax Rates  Amount To Tax    Tax Amount
0%         €  0,00          €  0,00
20%        € 15,00          €  3,00

Total € 18,00

* = tax already included in the price

Thanks
Marco

>
> On Feb 4, 2008, at 11:26 PM, Jacopo Cappellato wrote:
>
> > * tax should be computed and paid also for purchase orders
>
> ...
>
> > 2) implement automatic tax calculation for purchase orders
>
> With sales tax in the USA the selling party is responsible for
> collecting tax on behalf of the government (city, county, state, or
> federal). Is that also the case with VAT? My guess is that it is, but  
> I'm not sure.
>
> The reason I'm thinking about this is there is a reason we don't
> calculate tax for purchase orders: it is the responsibility of the
> vendor to calculate that tax and tell the purchaser what the tax
> liabilities are.
>
> -David
>
>

[David E Jones]

The taxVatCode field is an old one that isn't used in the current tax  
calc stuff using the TaxAuthority and related entities (which do have  
some VAT-specific features, and could have more).

-David


On Feb 5, 2008, at 9:37 PM, Enrique Ruibal wrote:

>
> I think weather or not VAT is calculated on a document depends as to  
> how it
> is defined under the product properties, as such I have seen in  
> other ERP
> systems.
>
> As for Ofbiz in particular I noticed there is a TAX VAT code field in
> product table..so shouldn't this be used to determine weather VAT is  
> going
> to be calculated on the sale or purchase order and also to wich rate  
> should
> this be calculated?
>
>
> David E Jones wrote:
>>
>>
>> On Feb 4, 2008, at 11:26 PM, Jacopo Cappellato wrote:
>>
>>> * tax should be computed and paid also for purchase orders
>>
>> ...
>>
>>> 2) implement automatic tax calculation for purchase orders
>>
>> With sales tax in the USA the selling party is responsible for
>> collecting tax on behalf of the government (city, county, state, or
>> federal). Is that also the case with VAT? My guess is that it is, but
>> I'm not sure.
>>
>> The reason I'm thinking about this is there is a reason we don't
>> calculate tax for purchase orders: it is the responsibility of the
>> vendor to calculate that tax and tell the purchaser what the tax
>> liabilities are.
>>
>> -David
>>
>>
>>
>
> --
> View this message in context: http://www.nabble.com/VAT-vs-Sales-Tax-again-and-again-tp15284214p15305347.html
> Sent from the OFBiz - Dev mailing list archive at Nabble.com.

[Christian Geisert]

David E Jones schrieb:
>
> The taxVatCode field is an old one that isn't used in the current tax
> calc stuff using the TaxAuthority and related entities (which do have
> some VAT-specific features, and could have more).

What about removing this field from the product screen?
(yes I'm volunteering ;-)

--
Christian

[Jacopo Cappellato]

David E Jones wrote:

>
> On Feb 4, 2008, at 11:26 PM, Jacopo Cappellato wrote:
>
>> * tax should be computed and paid also for purchase orders
>
> ...
>
>> 2) implement automatic tax calculation for purchase orders
>
> With sales tax in the USA the selling party is responsible for
> collecting tax on behalf of the government (city, county, state, or
> federal). Is that also the case with VAT? My guess is that it is, but
> I'm not sure.

I think it is the same with VAT.

>
> The reason I'm thinking about this is there is a reason we don't
> calculate tax for purchase orders: it is the responsibility of the
> vendor to calculate that tax and tell the purchaser what the tax
> liabilities are.
>

I agree that setting the tax amount in the purchase invoice in OFBiz can
be done manually when the real purchase invoice is received from the
supplier; however, having an "automatic estimate" of the tax for
purchase orders/invoices could be a nice feature to have... but yes,
this is not really a difference between sales tax and vat and we can
postpone the discussion about this feature.

The only real difference that I can see is that with VAT you pay to the
government the difference between the tax collected from customers
(sales invoices) minus the tax paid to suppliers (purchase invoice).
With sales tax, you just pay the tax collected from customers; in fact,
  companies that produce/distribute/sell items don't have to pay the
sales tax when they purchase because they are not end users
Is this a correct interpretation of the different nature of the two taxes?
If this is true, then adding basic support for vat tax to OFBiz will be
a matter of creating the proper report.

Jacopo


> -David

[Jacopo Cappellato]

Marco,

[hidden email] wrote:
> If I did not remember wrongly in Italy a company has to collect all the Sales Tax and Purchase Tax and pay to the government the difference between those two amounts.

yes

> In my opinion the VAT tax has to be calculated and shown (with tax included or excluded) at Order Item level because is it possible that for a order item we will have different tax rates or tax exemption (tax rate = 0).

Yes, I agree with you that calculating taxes (both for sales taxes and
vat) for each item is the right way to go: and OFBiz is already doing
this in the right way... no difference here between sales tax and vat,
no work required :-)

> For example if a stationer sell two differents products like that:
>
> Order Item 1   Newspaper        Price € 1,00 Tax € 0,00* Total € 1,00
> Order Item 2   Book Accounting Best Practices   Price € 15,00 Tax € 3,00 Total € 18,00
>
> Order Total
> Tax Rates  Amount To Tax    Tax Amount
> 0%         €  0,00          €  0,00
> 20%        € 15,00          €  3,00
>
> Total € 18,00
>
> * = tax already included in the price
>

I don't think that the example of the Newspaper is correct: if the tax
applies, then we have to store the price in OFBiz without tax (e.g. €
0.83); the way the price is shown to the customer is another issue but
it is not really related to the VAT tax.
But this is true both for sales tax and for vat... no difference here
between the two taxes.

Jacopo

> Thanks
> Marco
>
>> On Feb 4, 2008, at 11:26 PM, Jacopo Cappellato wrote:
>>
>>> * tax should be computed and paid also for purchase orders
>> ...
>>
>>> 2) implement automatic tax calculation for purchase orders
>> With sales tax in the USA the selling party is responsible for  
>> collecting tax on behalf of the government (city, county, state, or  
>> federal). Is that also the case with VAT? My guess is that it is, but  
>> I'm not sure.
>>
>> The reason I'm thinking about this is there is a reason we don't  
>> calculate tax for purchase orders: it is the responsibility of the  
>> vendor to calculate that tax and tell the purchaser what the tax  
>> liabilities are.
>>
>> -David
>>
>>
>

[rajsaini]

Just trying to understand it. How does the VAT applied to purchase? Is
purchase not some other party's sale and are they not responsible for
collecting tax on their sales? Here in India, we have VAT as well.
AFAIK, VAT is applied to the value added and not the sales prices
because part of the tax is already collected by the previous sale.

Raj

[hidden email] wrote:

> If I did not remember wrongly in Italy a company has to collect all the Sales Tax and Purchase Tax and pay to the government the difference between those two amounts.
> In my opinion the VAT tax has to be calculated and shown (with tax included or excluded) at Order Item level because is it possible that for a order item we will have different tax rates or tax exemption (tax rate = 0).
> For example if a stationer sell two differents products like that:
>
> Order Item 1   Newspaper        Price € 1,00 Tax € 0,00* Total € 1,00
> Order Item 2   Book Accounting Best Practices   Price € 15,00 Tax € 3,00 Total € 18,00
>
> Order Total
> Tax Rates  Amount To Tax    Tax Amount
> 0%         €  0,00          €  0,00
> 20%        € 15,00          €  3,00
>
> Total € 18,00
>
> * = tax already included in the price
>
> Thanks
> Marco
>
>  
>> On Feb 4, 2008, at 11:26 PM, Jacopo Cappellato wrote:
>>
>>    
>>> * tax should be computed and paid also for purchase orders
>>>      
>> ...
>>
>>    
>>> 2) implement automatic tax calculation for purchase orders
>>>      
>> With sales tax in the USA the selling party is responsible for  
>> collecting tax on behalf of the government (city, county, state, or  
>> federal). Is that also the case with VAT? My guess is that it is, but  
>> I'm not sure.
>>
>> The reason I'm thinking about this is there is a reason we don't  
>> calculate tax for purchase orders: it is the responsibility of the  
>> vendor to calculate that tax and tell the purchaser what the tax  
>> liabilities are.
>>
>> -David
>>
>>
>>    
>
>
>  

[Jacopo Cappellato]

Raj Saini wrote:
> Just trying to understand it. How does the VAT applied to purchase? Is
> purchase not some other party's sale and are they not responsible for
> collecting tax on their sales? Here in India, we have VAT as well.
> AFAIK, VAT is applied to the value added and not the sales prices
> because part of the tax is already collected by the previous sale.
>
> Raj
>

Yes, you collect taxes from customers when you sells items; you pay
taxes to the suppliers when you buy stuff; the difference is what you
pay to the government...

The example in the link I sent in the first post is very useful:

http://en.wikipedia.org/wiki/Value_added_tax

Jacopo

[Enrique Ruibal]

Hi,

I should just add, AFAIK, Sales Tax is linked to an Expense GL account,
whereas VAT from Purchases/Sales is linked to Assets and Liabilities GL
accounts respectively

-Enrique

Jacopo Cappellato wrote:

> David E Jones wrote:
>>
>> On Feb 4, 2008, at 11:26 PM, Jacopo Cappellato wrote:
>>
>>> * tax should be computed and paid also for purchase orders
>>
>> ...
>>
>>> 2) implement automatic tax calculation for purchase orders
>>
>> With sales tax in the USA the selling party is responsible for
>> collecting tax on behalf of the government (city, county, state, or
>> federal). Is that also the case with VAT? My guess is that it is, but
>> I'm not sure.
>
> I think it is the same with VAT.
>
>>
>> The reason I'm thinking about this is there is a reason we don't
>> calculate tax for purchase orders: it is the responsibility of the
>> vendor to calculate that tax and tell the purchaser what the tax
>> liabilities are.
>>
>
> I agree that setting the tax amount in the purchase invoice in OFBiz
> can be done manually when the real purchase invoice is received from
> the supplier; however, having an "automatic estimate" of the tax for
> purchase orders/invoices could be a nice feature to have... but yes,
> this is not really a difference between sales tax and vat and we can
> postpone the discussion about this feature.
>
> The only real difference that I can see is that with VAT you pay to
> the government the difference between the tax collected from customers
> (sales invoices) minus the tax paid to suppliers (purchase invoice).
> With sales tax, you just pay the tax collected from customers; in
> fact,  companies that produce/distribute/sell items don't have to pay
> the sales tax when they purchase because they are not end users
> Is this a correct interpretation of the different nature of the two
> taxes?
> If this is true, then adding basic support for vat tax to OFBiz will
> be a matter of creating the proper report.
>
> Jacopo
>
>
>> -David
>

[Jacopo Cappellato]

Enrique,

your posts about GL are very interesting and I'm marking them as
"Important" messages; I'm sure they will help us to complete the demo GL
setup.

Thanks

Jacopo

Enrique Ruibal A. wrote:

> Hi,
>
> I should just add, AFAIK, Sales Tax is linked to an Expense GL account,
> whereas VAT from Purchases/Sales is linked to Assets and Liabilities GL
> accounts respectively
>
> -Enrique
>
> Jacopo Cappellato wrote:
>> David E Jones wrote:
>>>
>>> On Feb 4, 2008, at 11:26 PM, Jacopo Cappellato wrote:
>>>
>>>> * tax should be computed and paid also for purchase orders
>>>
>>> ...
>>>
>>>> 2) implement automatic tax calculation for purchase orders
>>>
>>> With sales tax in the USA the selling party is responsible for
>>> collecting tax on behalf of the government (city, county, state, or
>>> federal). Is that also the case with VAT? My guess is that it is, but
>>> I'm not sure.
>>
>> I think it is the same with VAT.
>>
>>>
>>> The reason I'm thinking about this is there is a reason we don't
>>> calculate tax for purchase orders: it is the responsibility of the
>>> vendor to calculate that tax and tell the purchaser what the tax
>>> liabilities are.
>>>
>>
>> I agree that setting the tax amount in the purchase invoice in OFBiz
>> can be done manually when the real purchase invoice is received from
>> the supplier; however, having an "automatic estimate" of the tax for
>> purchase orders/invoices could be a nice feature to have... but yes,
>> this is not really a difference between sales tax and vat and we can
>> postpone the discussion about this feature.
>>
>> The only real difference that I can see is that with VAT you pay to
>> the government the difference between the tax collected from customers
>> (sales invoices) minus the tax paid to suppliers (purchase invoice).
>> With sales tax, you just pay the tax collected from customers; in
>> fact,  companies that produce/distribute/sell items don't have to pay
>> the sales tax when they purchase because they are not end users
>> Is this a correct interpretation of the different nature of the two
>> taxes?
>> If this is true, then adding basic support for vat tax to OFBiz will
>> be a matter of creating the proper report.
>>
>> Jacopo
>>
>>
>>> -David
>>

[Enrique Ruibal]

Jacopo I'd be glad to help and further review/comment on your
developments with regard to this matter.

-Enrique

Jacopo Cappellato wrote:

> Enrique,
>
> your posts about GL are very interesting and I'm marking them as
> "Important" messages; I'm sure they will help us to complete the demo
> GL setup.
>
> Thanks
>
> Jacopo
>
> Enrique Ruibal A. wrote:
>> Hi,
>>
>> I should just add, AFAIK, Sales Tax is linked to an Expense GL
>> account, whereas VAT from Purchases/Sales is linked to Assets and
>> Liabilities GL accounts respectively
>>
>> -Enrique
>>
>> Jacopo Cappellato wrote:
>>> David E Jones wrote:
>>>>
>>>> On Feb 4, 2008, at 11:26 PM, Jacopo Cappellato wrote:
>>>>
>>>>> * tax should be computed and paid also for purchase orders
>>>>
>>>> ...
>>>>
>>>>> 2) implement automatic tax calculation for purchase orders
>>>>
>>>> With sales tax in the USA the selling party is responsible for
>>>> collecting tax on behalf of the government (city, county, state, or
>>>> federal). Is that also the case with VAT? My guess is that it is,
>>>> but I'm not sure.
>>>
>>> I think it is the same with VAT.
>>>
>>>>
>>>> The reason I'm thinking about this is there is a reason we don't
>>>> calculate tax for purchase orders: it is the responsibility of the
>>>> vendor to calculate that tax and tell the purchaser what the tax
>>>> liabilities are.
>>>>
>>>
>>> I agree that setting the tax amount in the purchase invoice in OFBiz
>>> can be done manually when the real purchase invoice is received from
>>> the supplier; however, having an "automatic estimate" of the tax for
>>> purchase orders/invoices could be a nice feature to have... but yes,
>>> this is not really a difference between sales tax and vat and we can
>>> postpone the discussion about this feature.
>>>
>>> The only real difference that I can see is that with VAT you pay to
>>> the government the difference between the tax collected from
>>> customers (sales invoices) minus the tax paid to suppliers (purchase
>>> invoice).
>>> With sales tax, you just pay the tax collected from customers; in
>>> fact,  companies that produce/distribute/sell items don't have to
>>> pay the sales tax when they purchase because they are not end users
>>> Is this a correct interpretation of the different nature of the two
>>> taxes?
>>> If this is true, then adding basic support for vat tax to OFBiz will
>>> be a matter of creating the proper report.
>>>
>>> Jacopo
>>>
>>>
>>>> -David
>>>
>