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Note: Although you can set up Payables to automatically default tax names to invoices, in many tax regimes the supplier invoice is a legal document that governs the tax which is due, and any defaulted tax name should by updated in accordance with the tax name shown on the supplier invoice.
Typically, with the Item Method, the system searches for a tax name at all levels except the Account level. The Item Method is most suitable for implementations that are closely integrated with Oracle Purchasing, where tax names may be associated with inventory items on a purchase order and copied to the invoice during purchase order matching. See: Tax Defaults in Purchasing.
See: Defaulting Tax in Payables
By validating the tax name for your invoice distributions against the tax name assigned to your account, you can ensure that the tax amounts on your tax returns reconcile to the tax control accounts and that the taxable amounts on your tax returns reconcile to the Profit and Loss accounts. The Account Method is most suitable for implementations where the chart of accounts is set up for strict tax compliance and integration with Oracle Purchasing is not required.
See: Deriving Tax From a Natural Account (Account Method)
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