Setting-Up Your System for Withholding

The following steps should be followed to set-up your system for vendor tax withholding.

1.   When you set-up Reference File category 201, Company/Location Defaults, during system installation, determine whether withholding should be performed for the company/location at invoice or payment time, and set the Withholding Point flag accordingly.

Note:    The withholding amount calculated for an invoice at payment time may differ from the withholding amount calculated for the same invoice at invoice time.  Withholding at payment time is calculated based on the entire payment amount (including taxes and any other charges), while withholding at invoice time is calculated based only on the subject to withholding amount (which is usually only the amount subject to taxes).

2.   Determine the various withholding percentages you will need.  Each withholding percentage should be defined on Reference File category 234 and associated with a unique withholding code.  For instance, you may need to withhold 5%, 7%, 10%, and 15% from various vendors.  So, you need to define four different withholding codes on category 234, each with a different withholding rate.

3.   Specify the account/center to be credited for each withholding code you defined in step 2 on Reference File category 202, Account Number Assignment.  Use type 99 (1099 tax code) to specify an account/center for the withholding code.  When type 99 is entered on this category, the Code 1 field must be valid withholding code from Reference File category 234.

4.   Through the Vendor Master Maintenance conversation, assign the appropriate withholding code to each vendor from which you wish to withhold tax.  The withholding code is assigned on the remittance screen.  Remember that the withholding code does not affect 1099 processing.

Once you have completed these steps, vendor tax withholding will be performed for each vendor assigned a withholding code.