Manage taxes


Updated: November 1, 2016

Applies To: Dynamics Marketing


Microsoft Dynamics Marketing is scheduled to be retired on May 15, 2018. After that date the service will no longer be available. Please plan accordingly. For details, see the customer FAQ. You can also read the blog post Microsoft Dynamics Marketing service will be discontinued, and learn what’s coming next.

Microsoft Dynamics Marketing helps you to calculate, collect and pay sales tax, VAT (value-added tax) and withholding tax on invoices and expenses.


Tax rates can only be created by users with the Financial Manager User role.

To work with taxes, you must have Edit/View Accounting Manager privileges. More information: Work with user accounts and staff contacts.

Follow these steps to set up Microsoft Dynamics Marketing:

  1. Set up separate accounts in the chart of accounts to hold tax transactions.


    Do not use an account for tax and non-tax transactions! If you commingle tax and non-tax transactions in a single account you will not be able to use the reports in Microsoft Dynamics Marketing to help you prepare and file your taxes.

  2. Set up tax rates for all the taxes that are collected and paid.

  3. Select the tax rate that applies to each client and vendor contact.

  4. Determine which items and services are taxable.

  1. Set up separate sales tax accounts in the chart of accounts to track the sales tax you owe to each tax authority. More information: Chart of accounts

  2. Associate each tax rate with the tax account for that tax authority. For example, if you charge VAT in Thailand and in England, set up a Thai VAT account and an British VAT account.

  3. If you collect and pay VAT, we recommend that you set up an account for VAT, a sub-account for VAT collected, and a sub-account for VAT paid to simplify reporting to tax authorities.

Microsoft Dynamics Marketing enables users to override the default tax settings for a client, vendor, item, or service on each invoice and expenses line item. More information: Track costs of items, media, and services purchased from vendors 

Microsoft Dynamics Marketing lets users designate which items and services are taxable and which aren't. Based on these settings, Microsoft Dynamics Marketing defaults the tax status of each line item on expenses and invoices that are taxable. Users can override these settings on orders and expenses if needed. More information: Track items and services

Designate which vendors, clients, items, and services are taxable or tax-exempt, and which tax should be applied. Associate the appropriate tax rate with each contact so that Microsoft Dynamics Marketing automatically adds taxes to purchase orders, expenses, and invoices. More information: Site company

To work with tax rates, go to Budgeting > Settings > Tax Rates. This brings you to the Tax Rates list page, which provides many of the standard controls for searching, sorting, filtering, adding, removing and viewing items in the list, plus other common features. See Learn how to work and get around in Microsoft Dynamics Marketing for details about how to use these common controls.

Whenever you edit or create a tax rate, the settings described in the following table are provided.




Choose the check box to indicate that the tax rate is active.


Enter a code for the tax rate. For example you might enter IL for Illinois Sales Tax or VAT FR for French value added taxes. (Required.)


Enter the name of the tax rate. (Required.)

Account #

Select the general ledger account number from the pull-down menu. (Required.)

In most jurisdictions, taxes are collected and paid to the taxing authority periodically; usually monthly, quarterly or annually. To track your tax liability, setup a liability account for each tax jurisdiction to track your tax liabilities and tax payments.


Enter the tax rate. For example, if the Illinois Sales Tax rate is 8.75% enter 8.75.

Created by

Select a contact. (Required.)


Enter a description of the account. (Optional.)

Microsoft Dynamics Marketing provides functions to help you process withholding taxes. In Microsoft Dynamics Marketing withholding taxes refers to taxes that are deducted from payments made to vendors or received from clients. Withholding taxes are a common form of tax collected when a double-taxation agreement exists between the country/region in which the income is paid and the country/region of residence of the recipient. Be sure not to confuse withholding taxes as defined herein with the portion of an employee's tax liability paid directly to the government by the employer, as is common in the US.

Withholding tax doesn't use tax rates and must be calculated 'by hand'. Withholding posts to the Withholding Tax account specified.


For Withholding Tax functions to be used, users must specify a Withholding Tax account on the site's Financial Setup page, or if the site has multiple organizations, on each site's Organization Setup page.

Withholding taxes are applied to open invoices on the Accounts Receivable page.  When a Withholding Tax account has been specified, a Withholding Tax column is displayed on the Accounts Receivable page's Invoices grid. To specify withholding taxes:

  1. Enter the withholding tax amount for each invoice in the Withholding Tax field on the Invoice's row in the grid.

  2. Choose Submit.

Example - Withholding tax on invoices

A tax treaty between the US and Canada provides that services performed by US companies in Canada are subject to a 15% withholding tax. When a US organization bills a Canadian client for services, the Canadian client will deduct 15% from the total amount due to the US vendor. The tax treaty enables the US vendor to claim a credit on its income tax for the amount withheld by the Canadian client. So, if the US vendor invoices $10,000.00 US, the Canadian client will remit $8,500 ($10,000 - $1,500). When the payment is received by the US vendor, a Withholding Tax credit must be applied to the payment to offset the tax withheld. When the $8,500 payment is applied to the client invoice, the balance due will be $0.00.

Example - Withholding tax on expenses

A tax treaty between the US and Canada provides that services performed by US companies in Canada are subject to a 15% withholding tax. When a Canadian organization purchase services from a US firm, the Canadian client will deduct 15% from the total amount due to the US company. So, if the US organization invoices $10,000.00 US, the Canadian client will remit $8,500 ($10,000 - $1,500). When the payment is made to the US company, Withholding Tax must deducted from the Expense.

Using the example above:








Withholding Tax





Your tax authority may adjust your taxes with credits, penalties, surcharges and interest charges. In these cases the payment to the Tax Authority may be more or less than the amount of taxes collected. You can post these adjustments to the Tax account or to other general ledger accounts by adding items to the expense you create to pay the tax bill or by creating a separate expense.

  1. In the Chart of Accounts, open the General Ledger account used to track tax transactions.

  2. Choose the Filter button to search by date for the date range for which taxes are due.

    Microsoft Dynamics Marketing displays the total due.

  3. Create an expense. Specify the Tax Authority as the Vendor.

  4. Create an item and specify the appropriate Tax account.

  5. Go to the Accounts Payable page and pay the expense.

Microsoft Dynamics Marketing provides several reports to help you pay taxes.

Tax Reconciliation Tab

The Tax reconciliation tab is designed to support the tax reconciliation needs of certain tax jurisdictions such as Indonesia which have special requirements. The tax reconciliation tab provides support for tracking tax related documentation (such as Faktur Pajaks and Bukti Potongs used in Indonesia).

  1. Under Budgeting choose Settings. 

  2. Open the Chart of Accounts.

  3. Open the account you want to reconcile.

  4. Choose the Reconciliation tab.

    Microsoft Dynamics Marketing displays all the reconciliations for the account.

  1. Choose the New button New button.

    Microsoft Dynamics Marketing opens the new Reconciliation page.

  2. Enter the information.


Before reconciling an account:

  • Check that all transactions have been added.

  • Review your prior period tax statement for any credits or debits and enter them into Microsoft Dynamics Marketing.

To reconcile:

  1. In the Date field, enter the date of the reconciliation.

    Reconciliations are sequential and typically cover each reporting period. For example, if you are required to report and pay taxes monthly, Reconciliation would be created for each month.

  2. Select the transactions that you want to include in the tax payment by choosing their check boxes.  

    These transactions will be marked paid, and will no longer appear in future reconciliations to avoid double payment.

  3. Specify any country/region specific information such as Faktur Pajaks and Bukti Potongs used in Indonesia.

  4. Choose Submit.

Financial and general ledger accounts are designed for marketing budget management only. Financial features are restricted to the limits stated in the Security and Financial Disclaimer. Microsoft Dynamics Marketing is not designed to comply with country/region-specific laws, regulations, or common business practices.