Tax collection

Tax collection helps you track whether tax is being charged on bills and vendor credits using tax codes. Tax codes can be associated with an entity so the relevant codes are available to select when processing bills for that entity.

Tax codes can be created through supported ERP integrations or via Tipalti APIs. Tax codes cannot be created directly in the Bills UI.

What are tax codes?

Tax codes represent a tax type and rate (for example, VAT-UK 20% or VAT-Israel 17%). Tax codes can be set to Active or Inactive. 

• Only active tax codes are available when processing bills.
• If an entity is configured to use tax codes, tax code fields can appear at the bill level and/or bill line level. 
• If an entity is not configured to use tax codes, tax code fields do not appear on bills for that entity.

Tax code fields

• Tax code – The tax type and rate applied to a bill line (for example, VAT-UK 20%).
• Tax amount – The tax amount for the bill line. If you enter a tax amount, selecting a tax code is required. If you do not enter a tax amount, the tax code can remain blank (indicating no tax was charged for that line).
• Total – The sum of the net amount and tax amount for the bill line. This field is read-only and calculated automatically.

If you select a tax code, you do not need to enter a tax amount. Tipalti calculates the tax amount based on the net amount and tax code rate.

Where tax code fields appear

Tax code fields can appear in the following places:

• Bill details
• Invoice review
• Invoice PDF
• Approval email
• Bills CSV
• Bill Details report
• Bill update notifications and APIs

Tax code fields can be used in all bill flows except PO matching.
Multiple tax codes are not supported for Canada.

How tax codes are used in different bill flows

Invoice processing

For entities using tax codes

• If an invoice includes a tax amount, Tipalti captures the tax amount during invoice processing.
• If the entity has only one active tax code with a rate that matches the implied tax rate on the invoice (based on the net amount and tax amount), the tax code may be applied automatically.
• After processing, you can add a missing tax code and verify that the tax amount is correct before submitting the bill to the next stage.

For entities not using tax codes

During invoice processing:

• If bill lines are captured and the invoice includes tax, the tax amount is shown as a separate bill line.
• If bill lines are not captured and the invoice includes tax, the tax amount is shown at the bill level under the total net amount.

Self-billing and API or CSV-created bills

APIs that create tax codes

• CreateOrUpdateTaxCode SOAP API
• CreateOrUpdateInvoices and GetPayeeInvoicesListDetails SOAP APIs
• Create tax code REST API

For entities using tax codes

When bills are created via CSV or API:

• You can provide both the tax code and tax amount for each bill line, or provide only the tax code. 
• If you provide only the tax code, Tipalti calculates the tax amount automatically.

Bills can be created without tax even when tax codes are enabled.

For entities not using tax codes

If tax applies, add it as a separate bill line.

For the self-billing flow: if a bill has tax on it, the tax code, tax amount, and total for every bill line appear automatically on the invoice PDF. For these values to display, add three columns at the end of the bill lines table in your Invoice - Generated template (you can name the column headers as you wish).

What happens if tax codes change?

If an active tax code becomes inactive:

• The tax code remains on bills that are in Pending payment status or later.
• The tax code is removed from bills in earlier statuses. 
• Bills that are pending approval are sent back to AP so a new tax code can be assigned.

If the rate of a tax code changes:

• Bills in Pending payment status or later keep the existing tax amount.
• Bills in earlier statuses update the tax amount based on the new tax rate.

If the name of a tax code changes:

• The updated name appears on all bills linked to that tax code. 
• Bill status is not affected.

If you update an entity linked to a tax code so the code is no longer available for existing bills, those bills are treated the same as when a tax code becomes inactive.

Sync tax codes from your ERP

QuickBooks Online

QuickBooks Online customers in the UK, Australia, France, and Canada can enable tax code sync during setup in Sync Settings. Tax codes sync during the initial sync and on subsequent syncs.

Intacct

Intacct customers in supported regions can sync tax codes (Tax Details) to Tipalti and map Tax Solutions to entities.

• In Intacct, each entity is assigned a single tax solution.
• Tax details from different solutions can't be used on a single transaction. 
• If working at the top level in Intacct, you may need to create a custom bill header field to specify the Tax Solution.
• Tax codes are not supported in combination with Intacct PO matching.

SAP Business One

SAP Business One integrations support US tax codes on bill lines.

To prevent sync failures caused by missing tax information, you can configure a default exempt tax code for bills that do not carry a tax code. When tax information is missing on a bill, the default exempt tax code is used during sync.

Configure the default exempt tax code during the SAP Business One setup wizard or on the Sync Settings page. Make sure the exempt tax code exists and is active in SAP Business One.

Common questions