// Filename: docs/user-guides/general-ledger/settle-and-post-sales-tax.md

User Guide: Settle and Post Sales Tax

1. Goal

This guide explains the process for settling tax transactions for a specific period. The goal is to calculate the net tax liability owed to a tax authority, post the necessary clearing entries in the General Ledger, and generate a vendor invoice in Accounts Payable for the amount due. This process finalizes the tax reporting for the period and prepares the liability for payment.

2. Prerequisites

Before you can settle and post sales tax, the following configurations must be complete:

1. Tax Authority as Vendor: The tax authority you are paying must be set up as a Vendor in the Accounts Payable module. The VendorAccountId must be linked on the TaxAuthority record.
2. Tax Posting Groups: All relevant TaxPostingGroup records must have a Settlement Account specified. This is the GL account that will be used as a clearing account during the settlement.
3. Tax Period Header: A TaxPeriodHeader must exist for the tax authority, defining the settlement frequency (e.g., monthly, quarterly).
4. Open Tax Period: At least one TaxPeriod must exist with a status of Open for the settlement period you intend to process.
5. Posted Transactions: There must be posted transactions (e.g., from invoices or journals) with tax within the date range of the tax period.

3. Step-by-Step Guide

The process involves two main stages: running the settlement process and then closing the period.

Stage 1: Settle and Post the Tax Period

This stage calculates the liability and creates the payable invoice.

Step 1: Navigate to Tax Periods

1. Access the Tax Periods page from the General Ledger module.

2. You will see a list of all configured tax period headers. Find the header for the authority you wish to settle (e.g., "Monthly VAT Settlement").

   [Image: Screenshot of the Tax Period Headers list page.]

3. Expand the header to view its individual periods.

Step 2: Initiate the Settlement Process

1. Identify the specific, open tax period you want to settle (e.g., "October 2025").

2. Verify the period's date range and ensure its status is Open.

3. Click the Settle and Post button or action for that period row.

   [Image: Screenshot of the Tax Periods list showing the 'Settle and Post' button next to an open period.]

Step 3: Review and Confirm the Settlement

1. A confirmation dialog will appear, displaying the calculated tax settlement. You must provide the Transaction Date, which will be the posting date for the settlement journal.

   [Image: Screenshot of the 'Settle and Post' confirmation dialog.]

   The dialog will show a summary of the calculation:

   • Total Sales Tax Payable: The sum of all taxes collected from sales.
   • Total Sales Tax Receivable: The sum of all taxes paid on purchases that are recoverable.
   • Net Liability: The final amount owed to the tax authority. This is the amount that will be created as a vendor invoice.

2. Review the amounts carefully. If they are correct, confirm the Transaction Date and click Post.

Step 4: Verify the Outcome

Once the process completes, you can verify the results in two places:

1. Accounts Payable Module:

   • Navigate to the Purchase Invoices page in the AP module.
   • A new invoice will be present, created for the Tax Authority's vendor account.
   • The invoice amount will match the Net Liability from the settlement.
   • The invoice description will indicate that it is for a tax settlement (e.g., "Tax settlement for period October 2025").

   [Image: Screenshot of the AP Purchase Invoices list, highlighting the newly created tax settlement invoice.]

2. General Ledger Module:

   • Navigate to the Posted Journals page.
   • A new journal of type "Tax Settlement" will be present.
   • Viewing the voucher for this journal will show the detailed accounting entries that cleared the individual tax payable/receivable accounts and credited the tax settlement clearing account.

   [Image: Screenshot of the Posted Journals page, showing the new tax settlement journal.]

The tax liability is now a standard vendor invoice and can be paid using the normal Vendor Payment Journal process.

Stage 2: Close the Tax Period

After you have settled the period and verified the payable invoice has been created, you should close the tax period to prevent any further transactions from being posted into it.

1. Return to the Tax Periods page.
2. Locate the period you just settled.
3. Click the Close Period button or action.
4. Confirm the action. The status of the period will change from Open to Closed.

Important: You can only close a period if the net balance of its tax transactions is zero. The "Settle and Post" process automatically creates offsetting transactions to ensure this is the case. If you try to close a period that has not been settled, the system will display an error.