| Sales tax |  |
| Destination sales tax mainly applies in North America and Canada. The tax rates are determined by the local authorities in the jurisdiction where the goods or services are received or consumed. In many cases, multiple jurisdictions have authority over the same location. For example, the city, county, and state/province can each charge their own taxes and can each set their own rules for what is taxable and whether there are exceptions or maximum taxable amounts. Using a tax provider application The destination sales-tax can consist of multiple parts and multiple rates. You can use a tax provider for the tax computation. Expensed purchase tax In North America, expensed purchase tax is handled differently from the way it is handled outside North America. For details, refer to Expensed purchase tax. Sales tax codes For sales tax, you must define tax codes for the lowest level tax jurisdiction that you must report. For example, if sales tax is levied by the city, the county, and the state, you must define tax codes for the cities. If no sales tax is levied by the city level, but county and state sales tax apply, you can define tax codes for the counties. For transactions on which sales tax is levied by multiple jurisdictions, you can set up multiple tax codes. Multiple tax codes If a type of tax in a country consists of several parts that must be paid to different tax authorities, you must define the tax as a multiple tax code for this country. For each part, you must create a multiple tax code line in the Multiple Tax Code Lines (tcmcs0535m000) session. ERP LN assigns a sequence number to each line. The tax on the multiple tax code lines can be calculated in the following ways: Parallel Individually for each line Cumulative Including the tax amounts of previous lines Next, you specify the tax rates for each multiple tax code line in the Multiple Tax Code Lines (tcmcs0535m000) session. Determining the sales tax code To determine the tax rates and calculate the sales tax amounts, ERP LN uses the GEO code of the delivery address to link the tax code to a transaction. However, you cou can specify various types of sales tax exceptions and exemptions for specific transaction details and combinations of details. To determine the tax code, ERP LN searches for the most specific tax code defined for combinations of the following transaction details: Country Business partner Item Item group GEO code Because addresses determine the tax amounts, if you select the Include Tax in BP Balances check box in the COM Parameters (tccom0000s000) session and you use a tax provider, you must rebuild the open order balances when you change the addresses of: Business partners Logistic companies Departments Warehouses Tax exceptions You can define exceptions to the default tax codes for: Business partners, items, and so on. Combinations of place of origin and order acceptance location. Tax exemptions Transactions with specific business partners, involving specific goods, and/or with their origin or destination in certain countries or areas, can be exempt from tax. Sales invoices for transactions that are exempt from tax must have zero tax amounts. You can set up tax exemption for sales, for purchases, and for service activities. Tax exemptions for sales For sold-to business partners which are exempt from tax, you must set up tax exemption, and you must specify the customer's tax exemption certificate number and a tax exemption reason. For details, refer to To set up tax exemptions. Note If you use a tax provider, you cannot use the tax exemption functionality for sales. In that case the tax provider takes care of the sales tax exemptions. Tax exemptions for purchases You can register your tax exemption certificates for purchases, including purchases with direct pay tax. Direct pay tax is a way for a buyer to directly submit a sales tax to the tax authority instead of first paying it to the supplier. To withhold tax from the invoice, you must provide your direct pay certificate number to the supplier. In addition, you can set up a default exempt tax code for a warehouse or for all the warehouses of a logistic company. The Purchase Control sessions use this information to determine whether destination sales tax must be paid for the goods delivered at the warehouse. Note If you use a tax provider and you enter purchase tax exemption certificates in ERP LN, ERP LN passes on this information to the tax provider. Tax exemptions for service For service activities, you can specify that specific cost components or types of service transactions, or work related to a service contract at specific sites, is exempt from tax. You must specify a tax exemption reason. Direct pay Direct pay tax is a way for a buyer to directly submit a sales tax to the tax authority instead of first paying it to the supplier. To withhold tax from the invoice, you must provide your direct pay certificate number to the supplier. In various tax exception definition sessions, you can define exceptions and exemptions for direct pay tax. Note If direct pay applies to an order line, the order line must have a Shifted tax code. Related topics Overview of tax handling To use a tax provider To set up tax exemptions Expensed purchase tax Addresses, GEO codes, and tax jurisdictions Sales tax on installments Tax calculation and registration through the tax provider |