Tax Application to Term Discount in Customer Payment

Scenario:
· Tax application to term discount in customer payment

Findings:
· Application of tax to term discount is currently an enhancement (202781)

Alternate Solution:
To account for tax application to Discount Item for Customer Payments:

Option 1:
1. Create a Journal Entry via Transactions > Financial> Make Journal Entries
a. Debit the bank account
b. Debit the discount account (Account Type = Expense/Income/Other Income/Other Expense)
c. Enter Tax Code in the line item for discount account
d. Credit Accounts Receivable account

2. Apply the Journal Entry to Customer Invoice via Transactions > Customer > Accept Customer Payment

Option 2:
1. Create a Discount Item with the same rate as the Term Discount via Lists > Accounting> Items > New > Discount
a. Set Account value that is the same as the Term Discount’s since Posting = True for this Discount Item
b. Set Tax Code (or Tax Schedule if Advanced Taxes is enabled in account)

2. Enter the Discount Item to the Customer Invoice once payment is made by customer
a. Apply the tax code after the item to be discounted or after the Subtotal if there is more than item to be discounted
b. Make sure that correct Tax Code is applied to the discount item
c. Save the invoice
Invoice Accounts Receivable amount and tax amount is now net of discount

3. Create the Customer Payment without any discount amount via Transactions> Customer > Accept Customer Payment