Tax Management

Process Differences

As noted on the introductory tax page, P-Cards are associated with a different purchase-to-pay (P2P) process than other payment methods. This impacts how an end-user organization manages U.S. sales tax compliance. Note the differences below between traditional (no P-Card) and P-Card P2P processes.

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Additional Tax Content

• Tax introduction

• Use tax determination for P-Card transactions

• Four points to consider when preparing for a U.S. sales tax audit

• Six myths about tax compliance

• Blog post summarizing some tax tips (“Do not bury your P-Card tax skeletons”)

No P-Card

With a traditional purchase order (PO) and invoice process, the end-user organization typically knows the:

• taxability of each item when creating the PO (before providing the PO to the supplier)

• the states where the supplier collects sales tax, based on the supplier profile in the ERP system or master vendor file

• amount of sales tax collected by the supplier, per what is specified on the invoice

If the supplier does not collect sales tax on a taxable purchase, accounts payable (AP) accrues use tax in the AP system and remits accrued tax to the state each month on the sales tax return.  

P-Card

When employees use a P-Card to make an online or other non-face-to-face purchase, someone within the organization (e.g., cardholder or other) must identify:

• if the purchase is taxable in the state where it was delivered

• taxable transactions where sales tax has not been collected by the supplier, thereby requiring the organization to accrue use tax

Unlike the scenario noted at left, the taxability determination occurs post purchase, typically after the P-Card cycle closing date. The end-user organization can utilize P-Card transaction data to evaluate whether a use tax accrual is required on a given transaction.