April 15, 1997

MEMORANDUM No. NCAS-97-0052

TO:             Fiscal Officers & Accounts Payable Supervisors

FROM:        Don Waugh
                   Assistant State Controller

SUBJECT:  Tax Proration Method

As you know, six weeks ago we changed the method of prorating taxes across invoice lines. The new method of calculating taxes based upon a percentage assigned to each line was instituted to handle variable tax rates on a single invoice. Since the implementation of the new method, several agencies have complained that this new method is overly complex and slows down AP processing.

The new percentage calculation method has the advantage of verifying that the taxes charged and prorated match the designated percentage, which should result in more accurate tax reporting to the Department of Revenue. The old proration method does not provide this verification, but it is easier to use in some circumstances. Returning to the old method will require manual calculation of multiple rate prorations and manual verification.

Because tax proration method is set by Paying Entity, we have the capability to allow some agencies to return to the old proration method, while leaving the new procedure in place for other agencies. For example, an agency may want to return to the old proration method for employee and/or non-trade Paying Entities, where taxes are seldom incurred. If your agency would like to return to the old tax proration method, please call either Jim Macaulay at 981-5427 or Rick Pieringer at 981-5428.

DW/JM