If appropriate, KFS will generate Use Tax accrual entries for the transaction that charge the default (or updated) accounting on the PCDO.
When Procurement Card transactions are fed into KFS from US Bank, the system creates Procurement Card (PCDO) documents. These documents allow the Procurement Card reviewer and fiscal officer to reconcile the accounting used for the purchase and to apply Sales Tax (tax charged by the vendor which should be entered in the Vendor-Charged Sales Tax field) to the transaction.
Remember: Sales Tax is tax collected by and paid to the vendor, while Use Tax is tax paid directly to the CA State Board of Equalization.
When is Use Tax NOT accrued?
- If the Merchant includes Sales Tax amount in their feed data, no Use Tax will be accrued.
- If the Merchant is on the Merchant Tax Exempt table in KFS, no Use Tax will be accrued.
- If the Reviewer or Fiscal Officer enters a Vendor-Charged Sales Tax amount on the PCDO, no Use Tax will be accrued.
- If the Reviewer or Fiscal Officer checks Tax Exempt on the PCDO, no Use Tax will be accrued.
- If the Merchant state code in their feed data is CA, no Use Tax will be accrued.
- If the entered Postal Code is not in California, no Use Tax will be accrued.
- If the Use Tax Exempt indicator is checked for a specific accounting line on the PCDO, no Use Tax will be accrued for that specific accounting line. It will be accrued for other accounting lines on that transaction assuming none of the other conditions above are met.
Use Tax WILL be accrued in all other cases.
How is Use Tax accrued?
Once the PCDO is fully approved, ledger entries will be posted to accrue Use Tax, if applicable:
- Debit the current account on the PCDO accounting line(s)
- Credit the AP use tax accrual account
If the PCDO is not fully approved within 60 calendar days from initiation, it will auto-approve with the accounting information that is on it at that time.
The Use Tax rate and account will be determined as follows:
- If a Ship-To Postal Code is entered on the PCDO, the system will use that Postal Code tax rate to determine the Use Tax rate and accrual account.
- If no Ship-To Postal Code is entered on the PCDO (usually because it auto-approved), the system will use the shipping postal code associated with the Organization of the card's default account. The tax rate and accrual account will then be determined.
- If the Organization does not have a shipping Postal Code, the PCDO will use the current tax rate for the City of Davis Postal Code 95616.