VAT in the USA and its implications for current and old NAV

davmac1

NAV has long supported VAT. In the US, is the functionality turned off, or is it still there available for use?
It seems like a distinct possibility we will have it in the future - plus sales tax.
Does NAV support both at the same time on the same transactions?

Will customers on older versions be required to upgrade or can we turn it on?

David_Singleton

davmac1 wrote:

NAV has long supported VAT. In the US, is the functionality turned off, or is it still there available for use?
It seems like a distinct possibility we will have it in the future - plus sales tax.
Does NAV support both at the same time on the same transactions?

Will customers on older versions be required to upgrade or can we turn it on?

Yes its there, just needs to be set up. Also might have to show some fields on some forms.
But whats this about VAT? Are they going to have an abomination of a system like in Canada?

VAT is a much simpler taxing mechanism than sales tax, but only if it REPLACES sales tax, not if it is used in addition to. And there is no way I can see states and counties abandoning Sales Tax.

David_Singleton

Hmm just did some quick reading, I see that this is not just a hypothetical question.

Has the government gone insane? The bail out hinted that someone was crazy, but now this?

The core issue with the US economy is manufacturing. In that for too long people wanted to make money with out actually creating anything of value. If they are seriously proposing a 25% VAT it will slow down manufacturing even more.

On top of that the administration of VAT on top of Sales Tax will hurt small business.

Better check if I have any USD left whilst they are still worth something and change them fast.

DenSter

David Singleton wrote:

VAT is a much simpler taxing mechanism than sales tax

No it's not.... How can you say that? VAT is tax over the added value, you have this elaborate system of calculating exactly what is your "added value", what you owe on what portion of it, at which rate, paying and receiving tax, additional tax returns, and in the end it's the consumer that actually pays for it out of their pocket.

Oh wait.... that's the same a sales tax, only not as complicated!! Keep the tax where it's finally levvied, that makes it much easier.

David_Singleton

My dictionary says that "Less Complex", and "Simpler" are the same thing

DenSter

I think I messed up making my point... :oops: I meant that when it's the consumer actually paying the tax, then it makes much more sense to levvy the tax when the goods are consumed, which is what sales tax is. VAT is not simpler, it is more complicated.

David_Singleton

DenSter wrote:

I think I messed up making my point... :oops: I meant that when it's the consumer actually paying the tax, then it makes much more sense to levvy the tax when the goods are consumed, which is what sales tax is. VAT is not simpler, it is more complicated.

No it doesn't matter how you look at it, VAT is simpler than Sales Tax, but only if it Replaces Sales Tax. Obviously this ridiculous proposal to have Sales Tax AND VAT is a disaster.

In any case the only real difference between VAT and Sales Tax is where the onus lies on payment. With VAT the customer is liable, with Sales Tax the Vendor is liable. This is why VAT is much simpler since the person/entity that pays the tax is the one liable for the tax.

davmac1

My understanding of VAT is it is applied to the added value. So does this get applied to subcontractors/ Does it get applied to companies and individuals who buy and resell used goods?

With several states going broke, I see a real battle breaking out over Internet sales escaping sales tax and an eventual repeal with another "simple" system.

We will have it all soon.

David_Singleton

There is no way that they can remove state based sales tax, since the states have a right to do this, and are not going to rely on the Federal government to divvy out VAT revenues.

Introducing VAT would be pure insanity and would be the final nail in the coffin.


The issue of internet sales is a typical case of why sales tax is so complex. The Vendor must charge the customer sales tax if they are liable, and any mistakes the vendor pays for.
With VAT, everyone pays, and then those that can; claim back what they are due. This way if the customer messes up the issue is theirs alone and the vendor is protected.

This makes it very difficult to avoid the tax, since the government already have the money and you need to show just cause to get it back.

In terms of Value Added, that's simple, basically at every step of the sales chain (from raw material to manufacturer to distributor to customer) everyone pays the full tax based on the price they sell at. They then go back and claim the tax they paid for what ever they purchased, this way its all fair and you don't pay any double taxes.

David_Cox

In the UK VAT is added to the net selling price of an item after discounts and for some services that are deemed as 'Subject to VAT'

There could be multiple rates set for different categories we have 15%, 8%, Zero and Exempt, when the 15% rate was rushed through and changed from 17.50% recently Navision did not deal with this out of the box because unlike the Currency Exchange Rates there are no date dependant tables per VAT Business and VAT Product Posting Group combination, and we had Sales Invoices that needed to be at the new rate and Purchase Invoices that needed to be at the old rate.

As these rates are set by the government and the revenue created is paid to the government, businesses can claim back the VAT they pay, but they also act as unpaid VAT Collectors.

We do not have a local Sales Tax as well but we have a council tax which is set locally per household, although all the cal code is there for Sales Tax I do not think Navision would deal with multiple tax systems as standard ‘out of the box’ if you just took the existing VAT functions, there would likely need to be changes.

David

David_Singleton

David Cox wrote:

...although all the cal code is there for Sales Tax I do not think Navision would deal with multiple tax systems as standard ‘out of the box’ if you just took the existing VAT functions, there would likely need to be changes.

David

The W1 and UK versions don't but many versions do, including US, Canada, Australia, New Zealand, India and others.

The technical issue in NAV is not a problem, it will work out of the box (Maybe just adding some fields to some forms). But the political implications are huge.

David_Singleton

David Cox wrote:

There could be multiple rates set for different categories we have 15%, 8%, Zero and Exempt,

That's another thing about VAT, most countries break the VAT into something like "normal Items" "Luxury items" "special Items" and non taxed, and then customers are normal or exempt. With many variations of course, but in general just a handful of tax rates to calculate. At my last count, the US had about 45,000 different tax rates.

One assumes that the government official announcing this will be wearing Kevlar when they do so.

davmac1

I think they will call this the "Full employment act for accountants and programmers"