Learn how to set up Dynamics 365 Finance to automatically transfer sales tax liability for each state to their respective main account during the monthly settle and post sales tax process. Discover the correct configuration steps to ensure accurate and efficient sales tax reporting.
Table of Contents
Question
A United States-based company uses Dynamics 365 Finance to collect and report sales tax. The company has a main account for each state where they collect and report sales tax.
The system must transfer the tax liability for each state to their respective main account automatically every month when they run the settle and post sales tax process.
You need to configure Dynamics 365 Finance.
What should you do?
A. Create a sales tax settlement period for each state.
B. Select a vendor account during the sales tax group setup.
C. Create a sales tax ledger posting group for each state. Associate a settlement account to a main account for vendor accounts in the vendor posting profile.
D. Create a sales tax authority for each state and associate the authority with the respective main account.
Answer
D. Create a sales tax authority for each state and associate the authority with the respective main account.
Explanation
To configure Dynamics 365 Finance for automatically transferring the tax liability for each state to their respective main account when running the settle and post sales tax process every month, you should choose option D: Create a sales tax authority for each state and associate the authority with the respective main account.
Here’s why:
- Sales tax authorities: In Dynamics 365 Finance, sales tax authorities represent the government entities to which you report and pay sales taxes. By creating a sales tax authority for each state where the company collects and reports sales tax, you establish the necessary structure for accurate tax reporting.
- Associating main accounts: Each sales tax authority should be associated with the respective main account for that state. This association ensures that when the settle and post sales tax process is run, the tax liability is automatically transferred to the correct main account for each state.
Other options:
- Option A (creating a sales tax settlement period for each state) is incorrect because settlement periods are used to define the frequency of tax settlement and reporting, not for associating tax liabilities with main accounts.
- Option B (selecting a vendor account during the sales tax group setup) is incorrect because sales tax groups are used to group similar tax codes together, not for specifying the main account for tax liability transfer.
- Option C (creating a sales tax ledger posting group for each state and associating a settlement account to a main account for vendor accounts in the vendor posting profile) is incorrect because sales tax ledger posting groups are used to specify the ledger accounts for posting sales tax transactions, not for associating tax liabilities with main accounts.
By creating a sales tax authority for each state and associating it with the respective main account, you ensure that Dynamics 365 Finance automatically transfers the tax liability to the correct account when the settle and post sales tax process is run every month. This configuration simplifies the sales tax reporting process and ensures accurate financial reporting for the company.
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