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Vendor Tax Withholding
Vendor Tax Withholding
A withholding code exists on the Vendor Master File to allow you to set-up withholding rates for each vendor. The withholding rates are used to withhold a certain percentage of the payment amount from the vendor. Withholding rates are defined for each withholding code on Reference File category 234, Withholding Codes.
You may define whether vendor tax withholding is to be performed at invoice time or at payment time for each company/location through the Withholding Point flag on Reference File category 201, Company/Location Defaults.
If the withholding point is at invoice time, the withholding amount is calculated during the invoice entry, invoice maintenance, and recording manual payment conversations. Withholding is calculated based on the amount of the transaction that is subject to tax (either U.S. tax, VAT, GST, or PST). The calculated withholding amount is deducted from the total liability, and is treated as an additional line on the open item.
If the withholding point is at payment time, the withholding amount is calculated during payment processing based on the payment amount. The calculated withholding amount is deducted from the total cash paid to the vendor.
The 1099 classification of a vendor is not affected by vendor tax withholding. Regardless of whether withholding is performed for the vendor, you may still classify the vendor's transactions by 1099 code. Please see 1099 Tax Classification in the Key Concepts section of this manual for more information on 1099 processing.
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