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View Full Version : Peachtree takes discount after sales tax. WHY???


cuisupguy
03-28-2006, 09:38 AM
We have an ongoing arguement here in our office. We give our customers a % off for paying within terms. Peachtree can do that automatically. But it takes it off of the sales tax as well. However the amount of tax is not lowered to compensate for this when we pay the state. Shouldn't the discount be taken off BEFORE tax and not after? Is there a way to set Peachtree to do this? Is Peachtree wrong for taking a discount from the sales tax? What is the proper method?

cigargerald
03-28-2006, 09:14 PM
The amount of the discount should not include sales tax.

You should disclose in your terms that Sales Tax and (freight, if you choose) are not eligible for discount.

You'll have to manually adjust the amount you apply to the discount.

G-

LauraG
03-29-2006, 05:37 AM
Since PT applies the discount to the entire amount due does the program assume that you are still liable for the original amount of sales tax due and that discounting for early payment is just to help your receivables?

Markr1306
03-29-2006, 06:21 AM
The amount of the discount should not include sales tax.

You should disclose in your terms that Sales Tax and (freight, if you choose) are not eligible for discount.

You'll have to manually adjust the amount you apply to the discount.

G-

I am having similar but opposite problem. When Peachtree computes discounts on payables it takes it on the whole invoice. Lot of our vendors only allow discount on product and not freight and or sales tax. So we have to recompute sales tax manually. Any way around that to let the system compute it discount not taking into account frt or sales tax?

Lorin Browning
03-29-2006, 01:00 PM
There are two possible discounts that may be being confused here: a purchase discount and a prompt payment discount.

In the first case, the vendor is saying to the customer that if the customer were to buy the vendor's merchandise, then the vendor will sell that merchandise at less than the marked price.

In the second case, the vendor is saying to the customer that if he were to pay his account payable in a specified prompt manner, then the vendor will reduce his total statement amount due by a specified percentage.

If the discussion is about a prompt payment discount, then Peachtree is doing what it should. If the discussion is about a sales discount, then sales tax should be applied to the discounted amount of the sale.

LauraG
03-29-2006, 01:42 PM
I think we are talking about the prompt payment discount...In this case, are the companies still liable for the original amount of sales tax charged? This seems to be the real issue.

Markr1306
03-29-2006, 02:02 PM
I think we are talking about the prompt payment discount...In this case, are the companies still liable for the original amount of sales tax charged? This seems to be the real issue.

Well I guess I ask the question what do you consider the following

A discount of 2% on mdse only not frt or tax is allowed if paid by such and such date.

That to me is a prompt pay discount not a purchase discount. What you consider it

LauraG
03-30-2006, 05:15 AM
That is considered a prompt pay discount as set in the payment terms like 2% 10, Net 30 (2% discount if paid within 10 days with the Net due in 30 days). PT will see the full sales, sales tax and freight charges but posts the discount taken in the receipts window to a separate G/L account. The discount is calculated on the total amount due.

A purchase discount is when you discount the product at the time of the sale. For example, an item costs $100 but you give a good customer a discount of 10% and only charge him $90. In this case PT will only see a sale of $90 to charge the sales tax on.

Markr1306
03-30-2006, 05:58 AM
I tottaly agree with Laura just stating I wish Peachtree would allow you to only take discount on the mdse only and exclude the frt and tax. It is a pain to have to compute the discount mannualy and enter it for each invoice as we buy a lot from this vendor.

Lorin Browning
03-30-2006, 01:35 PM
I think we are talking about the prompt payment discount...In this case, are the companies still liable for the original amount of sales tax charged? This seems to be the real issue.

Sure they are. Sales tax is computed on the amount of the sale.

LauraG
03-30-2006, 07:05 PM
That's my understanding too.

And the discount is supposed to be calculated on the total invoice and not just the merchandise, correct?

jcnixon
04-04-2006, 12:39 PM
If you are offering, for instance, a 2%, 10 discount, not to include sales tax or freight and using the subtotal figure, then you have to manually adjust the discount amount in PT. Not a big deal, but certainly irritating. I have my invoice designed with a line that says: 'Discount does NOT apply to freight; please use sub-total to compute discount' and it is inserted right next to the sub-total field.

The only other option is to allow your customers to take a discount on the total invoice, and then you lose 2% (or whatever) on your sales tax and the freight, which becomes additonal expenses to you. It does add up!

Jan

cuisupguy
04-05-2006, 12:06 PM
The only other option is to allow your customers to take a discount on the total invoice, and then you lose 2% (or whatever) on your sales tax and the freight, which becomes additonal expenses to you. It does add up!


I am sorry, I should have said I was refering to a prompt payment discount.

If a customer takes a 2% discount for paying within terms Peach takes it from the total including tax. Is this right? Shouldn't the dicount be taken from the subtotal then the invoice be taxed from the new total? And to do this are some of you saying that we have to do this for each invoice? We send out at least 15 to 20 invoices daily, sometimes more. I don't want to have to calc. each invoices discount one at a time. Its becomes to confusing and not worth doing.

LauraG
04-05-2006, 03:17 PM
Peachtree does the calculation based on the total of the invoice at the time of the receipt posted. If you need to modify the amount taken manually in the receipt screen.