A tax collected for the next links of the chain, on a presumed base

Status: proposed

Context

Under tax substitution "forward" (substituição tributária para frente), the seller of certain goods collects, besides the tax on its own sale, the tax the next links of the chain will owe when the goods are sold on to the consumer. It cannot know the price of those later sales, so the law presumes it: the base is the value of the seller's own operation, plus the charges the buyer pays, raised by a margin of value added. The seller pays both taxes to the administration; the buyer pays the second one to the seller on top of the invoice, and owes nothing more when it resells.

The Brazilian ICMS-ST is the case this record is written for:

• the Lei Complementar n.º 87/1996, art. 6, lets the law of a state make a taxpayer liable for the tax of subsequent operations, and art. 8, II, sets the base: the value of the operation itself, insurance, freight and other charges paid by the buyer, and the margin of value added, profit included, of the subsequent operations; art. 8, § 4º, says the margin is set from the prices usually charged on the market, by survey, and § 6º allows a weighted average final consumer price instead (planalto.gov.br);
• the Convênio ICMS 142/2018 of CONFAZ sets the general rules of the regime between the states, the goods it may cover (its annexes, by CEST and NCM) and how a destination state fixes the margin, its cláusula vigésima terceira (confaz.fazenda.gov.br);
• between two states the margin is adjusted so that the difference between the interstate rate and the internal rate of the destination is not taxed twice: MVA ajustada = [(1 + MVA original) × (1 − interstate rate) / (1 − internal rate)] − 1, as the protocols between states write it, for instance Protocolo ICMS 02/24 (confaz.fazenda.gov.br).

The arithmetic, on an invented sale between two states — goods at a price of 1 000.00 that holds the seller's own tax at the interstate rate of 12 %, computed inside its base (decision 0077) and so 120.00; a margin of 40 %; an internal rate of 18 % at destination:

What the core has today does not reach it. A line carries one tax, and the reserved group of a pack is refused, so the tax of the chain cannot read the own tax of the same line to deduct it. A tax computes on the line's amount, never on a presumed one. Nothing keeps a margin. The pieces it does have are the ones this design is made of: a tax's postings, its boxes and their factors (decision 0019), a share booked as a cost on the accounts of the lines (tax_on_base), a tax computed inside its own base (decision 0077), the territories of the parties (decision 0024), and the classification of a line — its code held in document_lines.attributes under the attribute name its country declares, with the pattern of its codes (decision 0078).

Decision

The design below is proposed, and waits for one prerequisite: several taxes on one line, the reserved group, ordered, so that one member may read another. Nothing of it is built until that exists.

1. The margin is pack data, keyed by what is sold and where. A pack carries presumed_margins.json: one row per margin, naming the tax it serves, the classification it reads — the attribute of the line that holds the code, declared in the pack's classifications — and the code prefix it applies to (a CEST, an NCM heading — decision 0078), the territory of the buyer it applies in (applies_when.buyer_in, decision 0024), the margin in percent, its validity (valid_from, valid_to) and its article and source, like every rate. It compiles into a reference table; the longest prefix that matches the line's code wins, and a line with no matching row is refused by name (no_presumed_margin) rather than taxed on a guess. A weighted average final consumer price, where a state sets one instead of a margin, is the same row with a price per unit in place of the percentage.

2. The tax of the chain is a member of the group, with two closed keys.

• presumed_base: true — its base is the line's operation value plus the charges the line carries, times one plus the margin found in step 1;
• deducts: "<code>" — the member of the same group whose tax it deducts, the seller's own; and margin_adjusted: true where the margin is raised between two states, the engine computing the adjustment from the rate of the deducted member (the interstate rate) and its own (the internal rate), both already on the line. No expression: three named keys and one table.

The amount is rounded once per group as every tax is (BR-CO-14), the base first, at the currency, then the tax: the worked example above to the cent.

3. How it posts. On the seller's side the tax of the chain is not revenue: its tax posting credits the account of the tax collected for others and adds to the receivable, and its base posting books nothing on the ledger (factor 0) and reports the presumed base in its box (box_factor 100), so the declaration receives the base and the tax as the form asks. On the buyer's side the tax is not recoverable: one tax_on_base posting at 100 % puts it on the cost of the goods, as a non-deductible VAT is booked today. A credit note reverses both with their own postings.

4. What the declaration reads. The boxes of a substitution return are declaration boxes like any other (decision 0023), filled by the postings, per form; a destination state with its own return is a second form, which waits for a pack to carry more than one declaration form.

Consequences

• A pack states every margin with its article; the core holds the arithmetic and no margin, no rate and no state.
• The prerequisite is general and serves more than Brazil: Canada's two taxes in Québec (the pack's README) and any tax levied on top of another are the same group.
• Out of scope, and said so by the pack that needs them: the refund or the complement owed when the real final price differs from the presumed one; the tax substitution "backward" (deferral) and "concomitant"; the difference of rates owed by a buyer outside the regime (DIFAL) and any fund added to the rate; a buyer or seller under a simplified regime; the inventory adjustment when a good enters or leaves the regime; and the transmission of a return, which is the user's.
• Until it is built, a Brazilian pack books the own ICMS with decision 0077 and says in its README that the tax of the chain is not computed.

See also

• 0077 — A tax computed inside its own base is one key of the tax
• 0078 — A line names what was sold, by the classification its country declares
• 0020 — One tax engine, several kinds of tax
• 0019 — A tax posting carries the account and the box
• 0024 — A tax follows the territory of the parties
• packs/ca/README.md — one tax code per document line