Recording Tax on Prompt Payment Discount
Supplementary Tax Calculation SuiteApp is not compatible with the SuiteTax feature. If the SuiteTax feature is enabled in your NetSuite account, please do not install this SuiteApp.
To set up preferences for prompt payment discount, see Setting Up Prompt Payment Discount Preferences.
Prerequisites
To use the prompt payment discount feature, make sure the following prerequisites are either installed or enabled on your account:
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International Tax Reports SuiteApp (Bundle ID: 43003)
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Supplementary Tax Calculation SuiteApp (Bundle ID: 123426)
Note:For more information on how to install a SuiteApp or bundle, see Installing a Bundle.
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Go to Setup > Company > Enable Features and check the box for the following features on the SuiteCloud subtab:
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Custom Records
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Client SuiteScript
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Server SuiteScript
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Go to Setup > Accounting > Preferences > Accounting Preferences and check the box for the following preferences on the General subtab:
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Expand Account Lists
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Include Tax for Term Discounts
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Tax on prompt payment discount is the tax due on the amount after the discount is taken. For businesses that offer early payment discounts, NetSuite can automatically calculate tax adjustments when customers settle their invoice within the discount period. The system creates a credit memo or bill credit (for purchase transactions) for the tax adjustments. A link to the credit memo and bill credit is available on the invoice and bill where the payment is applied, respectively.
The tax adjustment is recorded using the Other Charge for Resale item. The Prompt Payment Discount Item property on the item record is automatically checked to indicate that the item is used to record the tax adjustment.
On the Billing subtab of the invoice, the following fields will be displayed if the Terms include prompt payment discount:
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Amount After Discount – This field displays the total discounted amount (excluding tax) of the items on the invoice.
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Tax After Discount – This field displays the applicable tax on the invoice after discount is applied.
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Total After Discount – This field displays the total discounted price of the items on the invoice.
These fields might not contain data in case of untrusted or external roles (for example, Customer Center role). Consequently, if you try to create a transaction using an untrusted or external role, you may see an error similar to the following message:
Unable to update discount fields in case of untrusted or external roles
Ensure that you are using a trusted role when creating a transaction.
To set up terms of payment, go to Setup > Accounting > Accounting Lists > New, and then select Term from the list. For more information, see Creating Terms of Payment.
For example, if a discount is applied to an invoice amounting to $480.00 (inclusive of 20% VAT), with Terms: 2% 10 Net 30, NetSuite would compute the total amount as follows:
The terms ‘2% 10 Net 30’ means that customers must pay within 30 days. And, if they pay within 10 days, a 2% discount will be applied to their payment.
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Invoice Details |
Amount Before Discount |
Discount |
Amount After Discount |
|---|---|---|---|
|
Net Amount |
$400.00 |
$8.00 |
$392.00 |
|
Tax Amount |
$80.00 |
$1.60 |
$78.40 |
|
Total Amount |
$480.00 |
$9.60 |
$470.40 |
Applying Prompt Payment Discount as a Single Transaction Line
NetSuite can record your VAT calculations and credit memo for early payments as a single transaction line. This is especially useful if your transaction record has multiple line items and would want to apply the discount for the total amount.
Enabling this feature will calculate tax discounts in credit memo and will display it as a single line grouped according to the applied tax code.
This feature is enabled in your prompt payment discount preferences. For more information, see Setting Up Prompt Payment Discount Preferences.
This is only applicable if Tax Rounding Level is set to Item Line Level in Setup > Accounting > Set Up Taxes. See Setting Tax Rounding Levels, Methods, and Precision Settings for more information.