Even with well-defined processes, sales tax mistakes can happen. An invoice may be taxed when it shouldn’t be, or sales tax may be omitted from a taxable transaction. If these errors aren’t corrected properly, they can impact customer balances, sales tax reporting, and compliance efforts.

Fortunately, Sage 100 provides several methods for correcting sales tax discrepancies depending on the transaction type. This month’s tip outlines the options available for Accounts Receivable (AR) invoices, Sales Order invoices, and invoice adjustments so you can make corrections accurately and maintain reliable financial records.

Tip summary: Use the appropriate method to correct sales tax errors

When sales tax is charged incorrectly, Sage 100 offers multiple ways to make corrections based on the original transaction.

• AR invoices can be corrected by creating a credit invoice and applying it to the original invoice.
• Sales Order invoices can be corrected through a Sales Order Credit Memo that adjusts taxable and non-taxable sales amounts while issuing a sales tax credit.
• Invoice adjustments can be used to increase or decrease sales tax directly, though this method does not update taxable and non-taxable sales amounts on the AR Sales Tax Report.

Selecting the appropriate method helps ensure customer balances and tax reporting remain accurate.

Tip steps: How to make sales tax corrections in Sage 100

Option 1: Correct an Accounts Receivable invoice

If sales tax was charged incorrectly on an AR invoice:

1. Navigate to Accounts Receivable > Main > Invoice Data Entry.
2. Create a new invoice for the same customer as the original invoice.
3. On the Lines tab:
   • Enter the same Sales Codes used on the original invoice.
   • Enter each Sales Code twice:
     • First as Non-Taxable (NT) with a positive quantity.
     • Second as Taxable (TX) with a negative quantity.
4. On the Totals tab, verify the Invoice Total reflects only the negative sales tax amount.
5. Post the Sales Journal.
6. Navigate to Accounts Receivable > Main > Cash Receipts Entry.
7. Process a cash receipt for $0.00 and apply the newly created credit invoice to the original invoice.

Option 2: Correct a sales order invoice

To issue a credit memo for sales tax only:

1. Navigate to Sales Order > Main > Invoice Data Entry and select Credit Memo as the Invoice Type.
2. On the Header tab:
   • Select the customer.
   • Use the same sales tax schedule as the original invoice.
   • Enter the original invoice number in the Apply to Inv. field.
3. On the Lines tab, add the first line:
   • Enter a Miscellaneous Item or Charge Code.
   • Select NT as the Tax Class.
   • Enter a quantity of 1.
   • Enter the original taxable sales amount as a negative value.
4. Add a second line:
   • Use the same Miscellaneous Item or Charge Code.
   • Select TX as the Tax Class.
   • Enter a quantity of 1.
   • Enter the original taxable sales amount as a positive value.
5. Verify that the two lines net to zero.
6. On the Totals tab:
   • Confirm the Taxable Amount and Non-Taxable Amount reflect the desired adjustment.
   • Verify the credit memo total equals the original sales tax amount.
7. Click Accept and post the Sales Journal.

Option 3: Correct sales tax through an invoice adjustment

For simple tax-only adjustments:

1. Navigate to Accounts Receivable > Main > Invoice Data Entry.
2. Enter the original invoice number and customer number.
3. When prompted, select Yes to adjust the invoice.
4. Review the sales tax amount shown in the Original Totals window.
5. Delete any lines automatically brought forward.
6. Add a Miscellaneous Code with no amount attached.
7. Select the Totals tab and click Tax Detail.
8. Enter the tax adjustment:
   • Negative amount to reduce the customer’s balance.
   • Positive amount to increase the customer’s balance.
9. Accept and post the transaction normally.

Important: This adjustment method does not modify the Taxable Sales or Non-Taxable Sales amounts on the Accounts Receivable Sales Tax Report.

Why this tip matters

Correcting sales tax errors promptly helps maintain accurate customer balances, supports reliable sales tax reporting, and reduces the risk of compliance issues. Using the appropriate correction method ensures that both financial records and tax reporting reflect the intended transaction.

If you need assistance correcting sales tax transactions, reviewing your tax setup, or optimizing your Sage 100 processes, our Sage 100 support specialists are here to help. Contact our team today to learn how we can support your organization and be sure to check back next month for the next installment of our Sage 100 Tip of the Month series.