BASIC TAX SETUPS IN E-BUSINESS TAX

These are the basic mandatory tax setups to be performed in the E-Business Tax 1. 2. 3. 4. 5. 6. odu!e in "#$ to enter Tax !ines manua!!y or ca!cu!ate taxes for any transaction% TAX REGIME: Tax "e&ime is setup for the taxes in each country and a &eo&raphic re&ion 'here you do business and 'here a separate tax app!ies% A tax TAXES: Tax is c!assification of a char&e imposed by a *o+ernment throu&h a fisca! or a tax authority% Each separate tax in a tax re&ime inc!udes records for TAX STATUS: Tax Status is the taxab!e nature of a product or ser+ice in the context of a transaction for a tax% TAX JURISDICTION: A &eo&raphic area 'here a tax is !e+ied by a specific tax authority% TAX RATE: The rate specified for a Tax status in effect for a period of time, the tax rate can be expressed as a percenta&e or as a +a!ue per unit )uantity TAX RULES: E-business tax uses the tax setups a!on& 'ith the tax ru!es to decide 'hich taxes app!y to a transaction and ho' to ca!cu!ate the tax amount for

re&ime associates a common set of defau!t information( re&u!ations( fisca! c!assifications and re&istrations to one or more taxes 'ith same tax re)uirement% statuses( tax rates and ru!es used to ca!cu!ate and report tax re)uirements

each tax that app!ies to a transaction%

Case Study 1
Business Re ui!e"en#- Ca!cu!ation of USE TAX in AP In+oices based on Ship To .ocation /ip code and Ba!ancin& Se&ment of Chart of Accounts% The re)uirement of c!ient 'as as fo!!o'sUse tax 'as ca!cu!ated in an AP In+oice based on the combination of the ba!ancin& se&ment in the chart of accounts and the 0ip code of a ship to !ocation% In ##i different sa!es tax codes 'ere setup for each combination of ba!ancin& se&ment and ship to !ocation% An offset tax code 'as attached to each of the sa!es tax code% 1or an in+oice 'here use tax 'as app!icab!e the user 'ou!d enter the sa!es tax code 2'hich has been attached to an offset tax code3 and +a!idate the in+oice% This 'ou!d &enerate t'o tax !ines one each for sa!es tax and offset tax% After the up&rade to 4rac!e "#$, Use tax can be app!ied on an in+oice in t'o 'ays# $ Simi!ar to ##i ma5e sa!es tax and offset tax codes to &enerate the use tax !ines in the AP in+oice% Use feature of Se!f Assessed tax 2ne'!y introduced in "#$3 for accountin& of use tax !ines% Concept of Se!f Assessed tax is exp!ained !ater in the document% In #$is %&se s#u'( )e $&*e use' +,#i+n 2 &s #$e -&se.

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Tax

6efine Tax "e&ime

ana&ers 8 Tax Confi&uration 8 Tax "e&ime 8 Create

"esponsibi!ity 7 Na+i&ation6efine one tax re&ime for country United States as sho'n be!o'-

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6efine Taxes

6efine one tax ca!!ed US USE TAX under the tax re&ime created for United States "esponsibi!ity 7 Na+i&ationTax ana&ers 8 Tax Confi&uration 8 Taxes 8 Create

C!ic5 on App!y to sa+e the chan&es

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6efine Tax Statuses

6efine one tax status for the tax re&ime and tax setup in the pre+ious steps% "esponsibi!ity 7 Na+i&ationTax ana&ers 8 Tax Confi&uration 8 Tax Statuses 8 Create

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6efine Tax ;urisdictions

6efine one tax <urisdiction for the tax re&ime and tax setup in the pre+ious steps% "esponsibi!ity 7 Na+i&ationTax ana&ers 8 Tax Confi&uration 8 Tax ;urisdictions 8 Create

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6efine Tax "ates

6efine mu!tip!e rates for the combination of Corp and Ship to !ocation 0ip codes% A tax rate is made for the combination of Tax "e&ime( Tax and Tax Status% 1or instanceBa!ancin& Se&ments BA.>A and BA.>B Ship to .ocation 0ipcode #?? and #?# The different rates 'hich can be setup are USE>BA.>#>#?? 8 =@ USE>BA.>B>#?# 8 #?@ USE>BA.>A>#?# 8 $@ USE>BA.>B>#?? 8 #@ "esponsibi!ity 7 Na+i&ationTax ana&ers 8 Tax Confi&uration 8 Tax "ates 8 Create

C!ic5 on Tax Accounts to enter the Expense and !iabi!ity account detai!s

Enter the Tax Expense Account% If this is !eft b!an5 the expense account for ITE The Tax "eco+erab!eA.iabi!ity is the Use tax .iabi!ity Account to be used%

!ine 'i!! be used%

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6efine Tax "u!es

4rac!e pro+ides a seeded set of Tax "u!es 'hich can be used by the user for tax ca!cu!ation% 1or any transaction made the tax determination process uses these tax ru!es to decide the taxes 'hich 'i!! app!y and the amount of tax 'hich has to be app!ied for a transaction% .!e!e uisi#es /+! se##in0 u, #$e T&1 Ru2es: S#e,1: To decide 'hether use tax app!ied on any transaction 'ithin Payab!es modu!e a tax c!assification code ca!!ed USE TAX APP.ICAB.E 'i!! be made% A tax c!assification code is simi!ar to a tax rate code 'ith a tax rate of ?@% "esponsibi!ity 7 Na+i&ationTax ana&ers 8 Tax Confi&uration 8 Tax "ates 8 Create

S#e,2: Create *eo&raphy CierarchyThe +arious 0ipcodes 'hich 'i!! be used in the tax ru!es ha+e to be setup in the &eo&raphy hierarchy in the tradin& community architecture% "esponsibi!ity 7 Na+i&ationTradin& Community ana&er D Administration D *eo&raphy Cierarchy Euery for country United States in the be!o' screenshot

C!ic5 on Fie' 6etai!s tab

Chose the State re)uired and c!ic5 on Fie' 6etai!s

Enter the +arious County detai!s or enter a defau!t county for the state as sho'n be!o'% C!ic5 on Fie' 6etai!s

Enter the different cities for the county and c!ic5 on Fie' 6etai!s to enter the 0ip code for each city%

Enter the 0ip codes 'hich 'i!! be used for tax ca!cu!ation 'ith the code type as GTax *eo&raphy CodeH% C!ic5 on App!y after creatin&Aupdatin& any chan&es

S#e,3: C!e&#e T&1 De#e!"inin0 3&%#+! Se#s "esponsibi!ity 7 Na+i&ationTax ana&ers 8 Ad+anced Setup 4ptions 8 Tax 6eterminin& 1actor Sets 8 Create

The determinin& factor 'i!! 'or5 in the fo!!o'in& mannerSince use tax had to be ca!cu!ated on in+oices based on the ba!ancin& se&ment and ship to !ocation 'e chose the fo!!o'in& +a!ues in a determinin& factor set#% $% 9% 1!exfie!d se&ment# of the .ine account is the ba!ancin& se&ment The ship to !ocation posta! code of the in+oice Since use tax 'i!! app!y on!y to certain in+oices 'e chose a transaction input factor and the +a!ue is ca!!ed as tax c!assification code% S#e,4: C!e&#e T&1 C+n'i#i+n Se#s "esponsibi!ity 7 Na+i&ationTax ana&ers 8 Ad+anced Setup 4ptions 8 Tax Condition Sets 8 Create

The tax condition set is made from the tax determinin& factor set% In the abo+e screenshot 'e ha+e made a tax condition set for ba!ancin& se&ment CIP and posta! code B$$?# usin& the determinin& factor set made in the abo+e set% TAX RULE SETU. "esponsibi!ity 7 Na+i&ationTax ana&ers 8 Tax Confi&uration 8 Tax "u!es

The fo!!o'in& tax ru!es 'i!! be setup for use tax ca!cu!ation#% 6etermine Tax App!icabi!ity- Since the tax US>USE app!ies on!y for use tax 'e ma5e this tax app!icab!e on!y if the tax c!assification code in the in+oice for an ITE !ine is GUSE TAX APP.ICAB.EH

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6etermine Tax "ate 8 This ru!e 'i!! deri+e the use tax rate for the in+oices usin& the determinin& factor set and condition set% Ihi!e ma5in& the tax ru!e 'e enter the determinin& factor set and the condition set made in the pre+ious steps as sho'n in be!o' screenshot%

1or each condition set there 'i!! be a different tax rate 'hich 'i!! be app!ied% Examp!eAs sho'n in abo+e screenshot there are : condition sets#% #% C4N6>CIP>B$$?# 8 This means that the ba!ancin& se&ment is CIP and ship to posta! code is B$$?#% If the in+oice satisfies these t'o conditions and the tax c!assification code is USE TAX APP.ICAB.E the tax rate used 'i!! be USE>CIP>B$$?#% C4N6>A C>B9#?9 8 This means that the ba!ancin& se&ment is A C and ship to posta! code is B9#?9% If the in+oice satisfies these t'o conditions and the tax c!assification code is USE TAX APP.ICAB.E the tax rate used 'i!! be USE>A C>B9#?9% 1or a!! the other ru!es the defau!t +a!ues ha+e been used%

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Concept of Se!f Assessed Tax

A se!f-assessed tax is a tax ca!cu!ated and remitted for a transaction( 'here tax 'as not !e+ied by the supp!ier but is deemed as due 2and therefore needs to be paid by the purchaser3% In such cases the purchaser is responsib!e for ca!cu!atin& and remittin& the tax% Se!f-assessment is a!so 5no'n as re+erse char&e or use tax in certain tax re&imes% Ihen se!f-assessment app!ies to a tax !ine( E-Business Tax creates the reco+erab!e andAor non-reco+erab!e distributions( and Payab!es creates an additiona! accountin& distribution to record the !iabi!ity for the se!f-assessment% Kou can set the se!f-assessment optionL At the tax profi!e !e+e! to defau!t to the tax re&istrations that you create for this party% L At the tax re&istration !e+e!% L 4n an indi+idua! tax !ine%

E-Business Tax app!ies se!f-assessment to Payab!es in+oices recei+ed by the first party accordin& to the tax re&istration settin& of the Set for Se!f AssessmentA"e+erse Char&e option% The specific tax re&istration record that E-Business Tax uses is deri+ed either from 6etermine Tax "e&istration ru!es or from the defau!t tax re&istration% Ie ha+e setup the se!f assessed tax feature at the Tax "e&istration !e+e!% Na+i&ation- Tax ana&ers 8 Come 8 Externa! 6ependencies 8 Create 1irst Party - .e&a! Entity and Estab!ishments Euery the .e&a! Entity -Fie' 6etai!s 8 Estab!ishments Tab 8 Euery Estab!ishment 2'hich is the 4U here3 8 "e&istrations 8 Create Tax "e&istration Since 'e are usin& the se!f assessed tax feature on!y for use tax in+oices 'e set up this option for the tax US>USE on!y% 4ther taxes 'i!! not ha+e this f!a& chec5ed%

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In+oice Creation and Use Tax ca!cu!ation

In+oice can be created in base tab!e or interface tab!e 'ith the tax c!assification code as USE TAX APP.ICAB.E% Use the correct ship to !ocation and ba!ancin& se&ments in the in+oice% The tax ru!es 'i!! be tri&&ered on +a!idation of the in+oice in base tab!es and the use tax !ine 'i!! be &enerated% Since 'e are usin& the se!f assessed tax feature there 'i!! not be any tax disp!ayed on the in+oice !ine( the tax detai!s 'i!! be +isib!e in the Tax 6etai!s form% They 'i!! a!so not be stored in ap>in+oice>!ines>a!! tab!e, instead they 'i!! be stored in 0x>!ines tab!e 'ith the trx>id 'hich 'i!! be the in+oice>id of the in+oice%

Tax !ines form indicatin& the use tax detai!s%

Case Study 2
Business Re ui!e"en#- Ca!cu!ation of SA.ES TAX in AP for In+oices made from source E"S based on Supp!ier site pin code The re)uirement of c!ient 'as as fo!!o'sThere 'ere many in+oices created in AP usin& the E"S source i%e create the P4 and "eceipt in Purchasin& modu!e and then run the GPay on "eceiptH pro&ram to &enerate the in+oice in interface tab!es 'ith source as E"S%

The standard Payab!es 4pen Interface Import pro&ram 'i!! then import these in+oices into base orac!e% Sa!es tax app!ies on some of these E"S transactions based on the 0ip code of supp!ier site% 1or instance- An E"S in+oice 'ith a supp!ier site A ha+in& 0ip code B99?# has a tax rate of #?@ to be app!ied 'here as supp!ier site B ha+in& 0ip code B$$M: has a tax rate of B@ to be app!ied% Since the E"S in+oice 'hich is inserted into the interface tab!e consists of on!y ITE 6etai!ed setups performed for the same% !ine 'e needed to insert one more TAX !ine 'ith the correct amount% Additiona!!y the tota! in+oice amount a!so has to be corrected to inc!ude the tax amount%

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Tax

6efine Tax "e&ime

ana&ers 8 Tax Confi&uration 8 Tax "e&ime 8 Create

"esponsibi!ity 7 Na+i&ation6efine one tax re&ime for country United States as sho'n be!o'-

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6efine Taxes

6efine one tax ca!!ed US SA.ES TAX under the tax re&ime created for United States "esponsibi!ity 7 Na+i&ationTax ana&ers 8 Tax Confi&uration 8 Taxes 8 Create

C!ic5 on App!y to sa+e the chan&es

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6efine Tax Statuses

6efine one tax status for the tax re&ime and tax setup in the pre+ious steps% "esponsibi!ity 7 Na+i&ationTax ana&ers D Tax Confi&uration D Tax Statuses D Create

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6efine Tax ;urisdictions

6efine one defau!t tax <urisdiction for the tax re&ime and tax setup in the pre+ious steps% "esponsibi!ity 7 Na+i&ationTax ana&ers 8 Tax Confi&uration 8 Tax ;urisdictions 8 Create

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6efine Tax "ates

6efine tax rates for each supp!ier site 0ip code% A tax rate is made for the combination of Tax "e&ime( Tax and Tax Status% 1or instanceSupp!ier site 0ip codes are B9##N and B#=:M% The different rates 'hich 'i!! be setup are SA.ES>B9##N 8 J%=J=@ SA.ES>B#=:M 8 J%$=@ "esponsibi!ity 7 Na+i&ationTax ana&ers 8 Tax Confi&uration 8 Tax "ates 8 Create

C!ic5 on Tax Accounts to enter the Expense and !iabi!ity account detai!s

Enter the Tax Expense Account% If this is !eft b!an5 the expense account for ITE

!ine 'i!! be used%

The Tax "eco+erab!eA.iabi!ity is the Use tax .iabi!ity Account to be used% Since this is a sa!es tax rate 'e enter the defau!t account of ??? for the same%

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6efine Tax "u!es

4rac!e pro+ides a seeded set of Tax "u!es 'hich can be used by the user for tax ca!cu!ation% 1or any transaction made the tax determination process uses these tax ru!es to decide the taxes 'hich 'i!! app!y and the amount of tax 'hich has to be app!ied for a transaction% .!e!e uisi#es /+! se##in0 u, #$e T&1 Ru2es: S#e,1: To decide 'hether use tax app!ied on any transaction 'ithin Payab!es modu!e a tax c!assification code ca!!ed SA.ES TAX APP.ICAB.E 'i!! be made% A tax c!assification code is simi!ar to a tax rate code 'ith a tax rate of ?@% "esponsibi!ity 7 Na+i&ationTax ana&ers 8 Tax Confi&uration 8 Tax "ates 8 Create

S#e,2: C!e&#e Ge+0!&,$( 4ie!&!%$(: The +arious 0ipcodes 'hich 'i!! be used in the tax ru!es ha+e to be setup in the &eo&raphy hierarchy in the tradin& community architecture% Set up the 0ip codes to be used for the supp!ier sites 'here sa!es tax needs to be ca!cu!ated based on the step $ in Point B in Case study #% S#e,3: C!e&#e T&1 De#e!"inin0 3&%#+! Se#s "esponsibi!ity 7 Na+i&ationTax ana&ers 8 Ad+anced Setup 4ptions 8 Tax 6eterminin& 1actor Sets 8 Create

The determinin& factor 'i!! 'or5 in the fo!!o'in& mannerSince sa!es tax had to be ca!cu!ated on in+oices based on the supp!ier site for E"S in+oices the determinin& factors 'ou!d be#% $% *eo&raphy 8 Ship 1rom posta! code Transaction Input 1actor 8 Tax c!assification code 'hich 'i!! be used for E"S in+oices% S#e,4: C!e&#e T&1 C+n'i#i+n Se#s "esponsibi!ity 7 Na+i&ationTax ana&ers 8 Ad+anced Setup 4ptions 8 Tax Condition Sets 8 Create

The tax condition set is made from the tax determinin& factor set% In the abo+e screenshot 'e ha+e made a tax condition set for posta! code B#=:M and tax c!assification code SA.ES TAX APP.ICAB.E usin& the determinin& factor set made in the abo+e set% TAX RULE SETU. "esponsibi!ity 7 Na+i&ationTax ana&ers 8 Tax Confi&uration 8 Tax "u!es

The fo!!o'in& tax ru!es 'i!! be setup for use tax ca!cu!ation9% 6etermine Tax App!icabi!ity- Since the tax US>SA.ES app!ies on!y for E"S Sa!es Tax 'e ma5e this tax app!icab!e on!y if the tax c!assification code in the in+oice for an ITE !ine is GSA.ES TAX APP.ICAB.EH

4. 6etermine Tax "ate 8 This ru!e 'i!! deri+e the sa!es tax rate for the in+oices usin& the determinin& factor set and condition set% Ihi!e ma5in& the tax ru!e 'e enter the determinin& factor set and the condition set made in the pre+ious steps as sho'n in be!o' screenshot%

1or each condition set there 'i!! be a different tax rate 'hich 'i!! be app!ied%

Examp!eAs sho'n in abo+e screenshot there are : condition sets#% #% C4N6>SA.ES>B9##N 8 This means that if the ship from posta! code is B9##N and the tax c!assification code in the in+oice is SA.ES TAX APP.ICAB.E then the tax rate used 'i!! be SA.ES>B9##N% C4N6>SA.ES>B#=:M 8 This means that if the ship from posta! code is B#=:M and the tax c!assification code in the in+oice is SA.ES TAX APP.ICAB.E then the tax rate used 'i!! be SA.ES>B#=:M% 1or a!! the other ru!es the defau!t +a!ues ha+e been used%

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In+oice Creation and Sa!es Tax ca!cu!ation for E"S in+oice%

*enerate the E"S in+oice in the in+oice interface tab!es usin& the pro&ram Pay on "eceipt pro&ram% Update the fo!!o'in& +a!ues for the E"S in+oice in the interface tab!eTAX C.ASSI1ICATI4N C46E 8 SA.ES TAX APP.ICAB.E CA.CU.ATE TAX A 4UNT 6U"IN* I P4"T 8 Set the f!a& to K A66 TAX T4 INF4ICE A 4UNT 8 Set the f!a& to K The ca!cu!ate tax amount f!a& and add tax to in+oice amount is set to K so that the Payab!es 4pen Interface Import pro&ram 'ou!d tri&&er tax ru!es and ca!cu!ate the tax amount and a!so add the tax amount to the in+oice amount% Cence the in+oice 'i!! be imported 'ith the tax !ine and correct in+oice amount% 1o!!o'in& is the update script for the sameUP6ATE apps%ap>in+oices>interface SET add>tax>to>in+>amt>f!a& O PKQ AN6 ca!c>tax>durin&>import>f!a& O PKQ ICE"E source O PE"SQ UP6ATE apps%ap>in+oice>!ines>interface SET tax>c!assification>code O PSA.ES TAX APP.ICAB.EQ ICE"E in+oice>id IN 2SE.ECT in+oice>id 1"4 apps%ap>in+oices>interface ICE"E S4U"CE O PE"SQ3 Snapshots of E"S in+oices in the interface tab!e% In+oice header in the interface tab!e before it 'as processed%

In+oice !ine in the interface tab!e

Supp!ier site pincode 8 B$$$9

After importin& this in+oice, the tax !ine has &ot &enerated based on the tax ru!e for Supp!ier site% The in+oice amount has a!so chan&ed from #??? to #?J9%=?