Letβs dive into the world of Salesforce Billing to debug tax rules. Here in this channel, I break down complex concepts with fun relatable real-time examples so that learning is fun. Wow!!!
Whatsapp Link for Salesforce CPQ Group to make learning fun and easy
Letβs Begin our learning with a coffee sipping! β
Use Case
Imagine you are running a chain of Starbucks stores across different states. Why not !! and your store offers a variety of tasty treats πβ¨
– Coffee: β
– Sandwiches: π₯ͺ
– Muffins: π§
Now, different items might have different tax rules based on the states you are operating in. For instance, in Mumbai, coffee might be taxed at one rate, while in Delhi, it might be tax-exempt.
Letβs understand the Terminology around Tax Rules in Salesforce Billing:
1. General Ledger (GL) Accounts: Think of GL accounts as financial notebooks, one for each type of transaction. For Starbucks, we might have different notebooks for things like
- Coffee Sales Mumbai
- Coffee of Delhi
In Salesforce, we create these for tracking all tax-related transactions. It is to jot down all the tax stuff for each product in specific regions.
2. Tax Rates: Different states have different tax rates. In Mumbai, caramel macchiato might have a tax of 8%, but in Delhi, a classic chai latte might be tax-free! So, we define these rates in Salesforce Billing, ensuring that each cup gets charged the correct tax based on its type and where it’s being sipped.
3. Tax Rules: We tell our Salesforce system, “Hey, our sandwiches in Mumbai have a different tax rule compared to the coffee in Delhi.β. We set these rules to decide whether a product is taxable and, if yes, how it should be taxed.
What is the use of the Tax Rule?
It determines if Tax gets calculated on the product or not.
- If you select Yes for the Taxable field (Yes/No), your tax rule must contain a tax treatment. Salesforce Billing calculates and applies taxes.
- If you select No for Taxable (Yes/No), your tax rule canβt contain a tax treatment. Use of a tax treatment for non-taxable products causes errors and unexpected behaviors.
4. Tax Treatments are like the detailed playbook for the rules, where we specify what playbook (tax calculation method) to use for each scenario. Tax Treatment is related to tax rules.
What is the use of Tax Treatment?
It Defines Tax Integration, Legal Entity, General Ledger
Fields used in Tax Treatment
1. Name -This is a unique tax treatment name like Mumbai Masala GST
2. Tax Integration – As a customer – Smriti orders her favorite Caramel Macchiato for INR 200 and a Blueberry Muffin for INR 100, the system is programmed to handle these numbers.
3. Tax Code- Now, the system applies the code to Smritiβs bill, adding an 18% GST. Hereβs the quick math:
- Caramel Macchiato: INR 200 + 18% GST = INR 236
- Blueberry Muffin: INR 100 + 18% GST = INR 118
Smritiβs total bill amounts to INR 354.
4. Tax GL Rule – As the cashier hands Smriti her receipt, the GL rule simultaneously lists this transaction in Starbucks’ financial diary, the General Ledger. It records the sales and the GST collected, ensuring the accounts reflect this INR 354 as ‘GST Payable.’
5. Tax Legal Entity – This transaction, a coffee sale for Smriti, holds legal significance. It is accountable for this INR 354.
5. Product Configuration: Hereβs where we tag each product with the appropriate tax rule. Itβs like putting a label on each coffee, sandwich, or muffin, showing which tax rule applies to it. So, sales reps know exactly what tax applies.
6. Order and Invoice Generation: Each time a customer orders something, be it a frappe or a snack, it’s like creating an ‘order’ in Salesforce. When it’s time to pay, we generate an invoice, calculating the total with the correct taxes because of the tax rules and rates we set up. If a product, like a seasonal special coffee in Mumbai, is tax-exempt, itβll show up on the invoice, but with a zero-tax value.
7. Automation: Imagine if we had to tell each Starbucks store how to calculate taxes for every single order. We can automate this in Salesforce. With automation, every time an order is placed, the system knows which ‘notebook’ to write in, what tax applies, and how to calculate it.
8. Handling Bulk Orders: And what if there’s a huge conference, and they decide to order a thousand lattes? We canβt create a thousand separate invoices. Salesforce allows bulk invoicing and automated invoicing, so with a few clicks, all thousand lattes are neatly invoiced and taxed correctly.
Step to Setup in Salesforce Billing
We will set up tax calculations for a particular business use case with Salesforce billing so that your Starbucks in this case can calculate tax on orders and invoices for the billing.
Configure the package level standard tax engine checks the tax calculation is based on field of Account billing address.
It means that based on the account address tax will be calculated.
The Diagram Below shows steps to set up tax rules.
1. Setup Tax Integration:Β We will be creating a new tax integration. Make sure it’s active. In integration we can choose the standard tax engine there’s also an option called Avalara up tax which is a third-party gateway.
I will set up Priority as zero so the order of priority will be first.
2. Create Tax Rate: A tax rate record that specifies the specific percentage that is applied to the taxable amount. For instance, if the Goods and Services Tax (GST) is 18% in Mumbai, then the tax rate that would be applied to the taxable transactions is 18%.
3. Setup Tax Rule: Tax rules are the conditions under which certain tax rates are applied. This can include the location of the sale, the type of product or service being sold, the time of year, etc.
What is the difference between tax rules and tax rates?
The “tax rate” is the actual percentage added to the transaction as tax, while the “tax rule” is the set of conditions that determine which tax rate to apply. Tax rules are necessary for businesses that operate in regions with variable tax laws or those that sell a wide range of products/services, each with its own tax implications.
4. Add Tax Treatment: It is related to Tax Rule. It contains fields like tax code, tax rate, and legal entity to ensure accurate taxation.
Yay! We have reached the end of this article with so much more insight on Salesforce Billing!
That’s how Salesforce Billing handles tax rules, making sure every coffee, muffin, or sandwich sold at Starbucks stores everywhere is taxed correctly and efficiently.
Happy sipping, and happy Salesforce-ing! πβπ
