Planning and Setup

This article is intended for admin-level users responsible for configuring and managing the IDI tax solution to meet specific business requirements.

Related Articles

Tax Management Overview

Managing Taxes on Orders and Accounts

Auditing Taxes

Tax Class Definitions

Before You Begin

This section will help you understand tax classes and jurisdictions, and how they will apply to your tax solution. It also provides a quick overview of the tax tables in the IDI platform, as well as the business rules and settings you may want to use in customizing your solution.

Tax Classes

Tax classes are defined for you by IDI. You assign them to chargeable items – billable products and usage, retail products, contract penalties, adjustment types, and usage types. The tax class drives which taxes are applied and how the tax charges are calculated.

Note:

The standard tax class definitions provided by IDI serve as a general guideline when assigning tax classes to products and usage types in the IDI platform. They are based on IDI’s interpretation of current tax and regulatory law and are subject to change. When determining an appropriate tax class, you should have a thorough understanding of your service offerings and applicable tax and regulatory law. IDI assumes no liability for customer reliance on default tax classes. You are responsible for assigning the appropriate tax class for all products and usage types. Consult with IDI when in doubt as to which tax class to assign. In addition, the parallel billing process helps uncover erroneous tax class settings prior to running actual billing.

The standard tax classes provided by IDI are listed in this Tax Class Definitions article. The definitions include examples of the products and services that would commonly be associated with each tax class but are not intended to be all-inclusive.

How and where to assign tax classes is covered in the sections on configuring adjustment types, usage types, and product catalog items later in this article.

Tax Jurisdictions

Applicable taxes, rates and exemptions are dependent on tax jurisdictions assigned to accounts, services, and retail products based on an associated address.

• Account Level – Account-level charges are taxed based on the tax jurisdiction, exemption flags, and extended exemptions assigned at the account level. Customer accounts are assigned a tax jurisdiction when you add a new account. The jurisdiction on an existing account can be edited as required. The account-level jurisdiction defaults to the primary customer contact address. That address may be overridden by selecting a tax state, and a specific tax jurisdiction within that state.

• Service Level – Charges at the service level are taxed based on the tax jurisdiction and extended exemptions on the specific service. Services are assigned a tax address (tax jurisdiction) when you add a new service (Orders). The tax address defaults to the primary customer contact address. You can override the tax address or set it to a service address if the IDI platform environment is set up to support this.

  Note:

  In order to use a service address for taxing (typically preferred by wireline service providers), you must request IDI to enable this capability on an environment-basis on your behalf.

  You can also set the tax address on a service to the service contact address. This can only be done on services that exist on the account (not supported in orders). The IDI Desktop Client and Customer Care let you link a service contact to a service and then make that the default tax address.

• Retail Product – During order assembly the tax address for a retail product defaults to the retail location’s address. You can change this for a specific retail item to one of the following addresses: primary customer contact, service address, or service contact.

Details on how and where to assign tax jurisdictions are provided in the article about managing taxes on orders and customer accounts.

Tax Tables

The Tax Management table contains state and local tax rules.

Note:

State includes US Federal, and foreign taxes (particularly for Canada and Central America). IDI manages this table on your behalf. Changes to this information can be made via service request. Authorized IDI Desktop Client users can view the content as needed via Tax Management > View > Taxes.

Details on viewing this table are available in the IDI Desktop Client help under Support Applications > Tax Management.

Business Rules and Settings

Settings in the Config and Admin Consoles are set up by IDI on your behalf. Work with your IDI implementation team to determine what settings may apply for your custom tax management solution. Subsequent (post implementation) changes can be made via a service request. These settings may be of particular interest to you:

• A setting that enables the option to make service address the tax address on a service. This option is not available without enabling this setting.

  Note:

  Once set, this should not be turned off. Also, refer to the section on Tax Jurisdictions above to learn about all available options for setting the tax address for account, services, and retail products.

• For POS applications – Recalculate retail taxes during a return.

• A setting to avoid tax calculations at the service level when the invoiced charges for a service are equal to zero.

The parallel billing process helps to uncover areas where setting adjustments may be needed.

Do Not Charge US Federal Tax for Accounts Outside the US

The IDI platform is set up to evaluate tax exemptions during billing to determine if taxes should be charged. This process does not take the customer’s location into consideration. When you have a customer that is outside the United States, you may want billing to bypass the evaluation for US Federal Taxes, regardless of how the exemption flag is configured. This can be accomplished by enabling the Taxes setting in Customer Care: Do Not Charge US Federal Tax Outside United States.

To enable this setting, select MANAGE > Settings. You will see the Taxes section on the Settings page. The setting is disabled by default. Click the edit icon, check the box next to the setting, and then click Save.

You can learn more about the setting by clicking on the more info icon  .

Special District Maintenance

The IDI Tax group manages Special District maintenance. The CoreLogic web service provides a list of FIPS and Special Taxing Districts that define regions throughout the US for assessing taxes. The solution has its own system of tax jurisdictions that map to these regions, and that define a set of taxes for each region. The IDI Tax department maintains a set of mappings between the FIPS and Special Taxing Districts, and IDI’s internal set of tax jurisdictions.

Taxes Database Version

To ensure that you have the most recent tax database from IDI, check your installed version. From the Application menu, select Tax Management > Taxes Database Version. This displays the date of the installed taxes database.

Permissions

Permissions in Admin Console > Security > Permission Profiles let you grant or block users’ access to various tax-related functions. How to manage permissions is covered in Admin Console help under Security > Permission Profiles.

Access to Tax Management menu and submenu options shown below is controlled by the Application > CostGuard Client > Tax Management permission, This is needed to view tax management tables.

These POS permissions govern viewing/override line-item taxes on a retail sale:

• Application > CostGuard Client > POS > Front Office > Sales and Returns > Line Item Taxes

• Application > CostGuard Client > POS > Front Office > Sales and Returns > Line Item Taxes > Override

• Application > CostGuard Client > POS > Front Office > Sales Requests > Line Item Taxes

• Application > CostGuard Client > POS > Front Office > Sales Requests > Line Item Taxes > Override

Admin Console > Data Management

Account Types

An account type is assigned when you add/edit a customer account. For taxing, it defines whether to tax the account as residential or business. This assignment carries through to all customer accounts of that type.

Note:

There is also a Tax Type associated with a service. If account and service tax type are mismatched, for example, a residential account tax type and a business service tax type, it will be reported in the Mismatched Tax Account Types report in Report Explorer.

Adjustment Types

This table defines the various types of adjustments that can be applied to customer account balance(s). Adjustment Types are assigned a Tax Class.

Usage Types

Usage types are tied to service types and tax categories (which are actually tax classes). When service type catalog items are configured with a Usage Tax Method set to Usage Tax Class (in the Product Catalog), taxing of the usage is based on the specific usage type. For services that may allow numerous usage types, such as POTS, which could have Domestic 1+ calls, DA calls, long distance calls, etc, the usage charges for each could be taxed differently or all the same based on service type configuration as described in Considerations for Tax Class on Service Types later in this article.

Note:

As mentioned previously, it is recommended to consult with IDI to make the correct tax class assignments. Also, the parallel billing process can help to uncover erroneous tax class settings prior to running actual billing.

Product Catalog – Catalog Item Tax-related Settings

The following catalog item types require setup for taxes.

• Products (billable products)

• Packages

• Pricing Plans

• Services

• Retail Products

• Dynamic Products

• Contracts > Penalties

• AdvancePay Products

The following tax-related settings are available on the Main or Tax tab depending on the catalog item type. Some apply to all catalog item types. Others only apply for certain catalog item types. Special considerations based on catalog item type are described below as applicable.

Charge Tax Class

This is applicable for all chargeable catalog items. This selector is available on the Main tab for products, packages, services, and on the Taxes tab for all other catalog items. The product view of the Main tab is shown below. The available options come from the standard tax classes defined by IDI. Use No Tax Class Assigned only when you need to suppress all taxes and surcharges for the catalog item.

Note:

This selector is also available for Discount catalog items; however, it is not applicable for discounts.

Note:

As mentioned previously, it is recommended to consult with IDI to make the correct tax class assignments. Also, the parallel billing process can help to uncover erroneous tax class settings prior to running actual billing.

Considerations for Tax Class on Service Types

The Service Tax Class and Usage Tax Method settings for service types determine how usage is taxed for services of a given type. The system first considers the Usage Tax Method:

• If Usage Tax Method is set to Service Tax Class, all usage (regardless of usage type) is taxed based on the selected Service Tax Class.

• If Usage Tax Method is set to Usage Tax Class, the Service Tax Class setting is ignored, and usage for each usage type is taxed based on the usage type’s tax class.

• If Usage Tax Method is set to Do Not Tax, usage is not taxed at all.

  

Note:

From a troubleshooting perspective, if usage tax charges are in question, first verify the Usage Tax Method on the service in the Product Catalog. If it is set to Usage Tax Class, go to the Usage Types table in Data Management and evaluate the Tax Category assignments for each usage type.

Extended Tax

This is only applicable for billing product catalog items. It can be used to present the price of the item in the taxes section of the invoice rather than the MRC listing. It can also be used as a surcharge or fee, in which case, the item itself is not taxed.

Exemptions

Exemptions can be specified for all chargeable catalog items (except services where only extended exemptions can apply).

• Account-level exemptions trickle down to all services.

• Service-level extended exemptions are additive.

• Product-level exemptions are the lowest priority, and are additive but in situations where there are no account-level or service-level exemptions, they are the only exemptions considered.

These options are presented on the Taxes tab. Checking a box exempts the catalog item from ALL taxes in the selected category.

Note:

Exemptions can also be set on a customer account. This is covered in the article about Managing Taxes on Orders and Accounts.

Extended Exemptions

Extended Exemptions let you select a specific tax of a given type rather than exempting the catalog item from all taxes of a given type as with general exemptions. For example, for the federal category you can exempt one specific surcharge rather than exempting all of them. Extended exemptions can be specified for all chargeable catalog items.

Note:

This is the only option for services (no general exemptions on services).

Right click in the grid and select a category (Federal, State, County, City, Regional).

Then select the specific tax (only one can be selected at a time). Repeat for additional items.

Subject to E911

This option is presented on the Taxes tab for all catalog items, except for services. Enabling Subject to E911 on a product indicates the service the product is assigned to is able to dial 911 and is subject to E911 taxes. It is recommended to review the Product Catalog configuration to ensure all applicable products, which represent charges for service access, are appropriately flagged with this setting to ensure all applicable services have at least one product with this setting enabled.

Distance type

This applies to products, packages, and AdvancePay products. It’s used to specify how taxes differ between Intrastate, Interstate and international, if needed. This is not applicable for wireless. It’s presented on the Taxes tab when applicable and defaults to Intrastate.

Per-line Tax Configuration

This only applies to services. A Per-Line Tax Configuration tab is available on services when the Service Tax Class is set to Local or VOIP.

Note:

For new implementations, it is recommended that you work with the IDI project management team to set this up. After that, you can maintain this setup as needed. Refer to the Per-line Tax topic in the Services section in IDI Desktop Client help under Product Management > Product Catalog.

About Per-line Taxes

Per-Line taxes are flat fees based on a count of active services or lines which each have an assigned tax jurisdiction; they are assessed in addition to usage and product charges but are not assessed ON usage or products. Examples of per-line services may include circuits that may have multiple channels or services per line.

For example, a POTS line would be a single line with a count of 1, whereas a T1 with 24 lines would be treated as per channel with a count of 24.

IDI’s tax logic determines whether to tax based on the whole service/single line or the individual channels. For example, if you selected Default, PBX/Trunk, or Centrex, you would configure only the Per-Single Line values for Inbound and Outbound Voice and Data, and then when the system is applying tax, it typically knows to ignore items marked as Inbound only or Data Outbound only.

In most jurisdictions, per-line assessments are only imposed on outbound voice service. Inbound only and data only lines/channels are not usually subject to per line assessments.

But if you selected PRI or OtherMultiChannel, you would configure both Per-Single Line and Per-Channel, and IDI’s tax logic will determine which applies based on the tax jurisdiction being evaluated for the assigned instance of the service. For example, in some municipalities in CA, a T1 is charged a large flat tax amount as a single service/line, whereas in most other states, it is usually assessed on a per channel basis.

Private Line Configuration

This applies for billing products and services. You designate a product or service as Private Line by selecting that option from the Tax Class selector.

When you include a private line product or service in an order, you’ll be prompted to configure tax allocations on the product/service in Customer Care. For details, see the article on Viewing Private Line Tax Information in Customer Care in the IDI knowledge center or the Customer Care User Guide.

About Private Lines

A private line is a telecommunications service that entitles the customer to exclusive or priority use of a communications channel or group of channels between or among termination points, regardless of the manner in which such channel or channels are connected, and includes switching lines, stations, and any other associated services provided in connection therewith. Private line service bypasses the PSTN (public switched telephone network).

Private lines tax services (the charges on the services) differ from other types of services and dedicated lines. For Private lines services, the billable products/features can be taxed at the Orig AND Term locations of the two ends of the circuit (location A & Z). They are typically dedicated circuits with contracted rates, so configuration might also include a typical ETF-based contract, but usually there would not be additional discounts. The tax allocation can be a percentage-based split between the Orig location tax jurisdiction and the Term location tax jurisdiction; however, it is also possible to simply allocate 100% on the Orig A location. And, although 100% on Orig location and 50/50 splits are common, the system is flexible to support all variations across numerous tax jurisdictions, as long as the total allocation equals 100%.

Note:

When Service Class = Private Line, and Service Tax Class = Private Line, then a billable product with the same Tax Class = Private Line can work together to allow private line taxes to be configured.

One-Price Package – Taxing at the Component level

This may be specified on one-price packages and is highly recommended. It calculates taxes for component items in the package proportionally rather than cumulatively.

For example:

Consider a one-price package priced at $100. It includes three components, each with different individual price and tax class: a $30 item taxed as Local; a $40 item taxed as Toll; and a $50 item taxed as Feature. Together, the items total $120, but you are only charging $100 for the bundle. Taxing at the component level calculates taxes for the percentage of the total value each item.

Calculation:

Component Price/Component Sum x Package Price = $ Tax per tax class

Calculated tax per tax class:

• 30/120 x 100 = $25 tax as Local

• 40/120 x 100 = $33.3333 tax as Toll

• 50/120 x 100 = $41.6667 tax as Feature

Note:

With packages, the Charge Tax Class values on child products inside the package are ignored unless you choose to tax by component. AND, in situations where all of the child products are of the same tax class (as each other and as the parent package), then the tax at component level is not as meaningful.

This option is enabled on the Taxes tab when One-Price Package is selected on the Main tab. This also enables the General Ledger at Component Level option on the Main tab.

Selecting Tax at Component Level also enables the Federal Excise Exempt option:

• Selecting makes the entire package exempt from federal excise tax. This includes all packages components.

• The federal excise tax is levied according to each component when cleared (unchecked).

Configuring Tax Options for Contract Penalties

While contracts are not chargeable, you can specify tax options for contract penalties. Right-click in the Contract Penalties grid to add a new penalty.

The Tax Class selector is available on the Main tab.

All other options are available on the Taxes tab.

Desktop Client > BackOffice Management > General Ledger

The IDI Client BackOffice Management > General Ledger provides two areas related to taxes.

Account Subcategories

The base IDI GL module provides the following standard subcategories:

• Tax Payable (Liability)

• Tax Expense (Expense)

• Tax Deferred (Liability)

In addition, other tax-related subcategories are available for retail sales:

• Retail Use Tax Return (Liability)

• Retail Use Tax (Liability)

• Retail Tax Return (Liability)

• Retail Tax Expense (Expense)

• Retail Tax Deferred (Liability)

• Retail Tax (Liability)

Overrides

General ledger configuration also lets you set overrides in the Account Assignment section to drive revenue, expenses and liabilities related to taxes into their specific tax accounts for reporting. There are two tables related to taxes:

• Tax States – lets admin users specify which GL accounts will receive the various tax subcategories. Right-click a state to edit the General Ledger Properties, and use the Edit button to set overrides.

• Taxes – lets admin users go even deeper by specifying which GL accounts will receive the various tax subcategories for individual specific taxes. Right-click the table to add a row, then select the Tax State and Tax ID. Use the General Ledger Properties table and Edit button to set overrides.

Note:

The Tax States table should be configured before the Taxes table. This is an area of constant maintenance as taxes are updated and/or become defunct.