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Overview of Calculating Tax

The following flowcharts show the hierarchy Receivables uses to calculate tax. Use the flowchart titled 'Tax Method = Sales Tax' if you are using a Sales or location-based tax system. Use the flowchart titled 'Tax Method = Value Added Tax' if you are using a VAT or tax code-based system.

When using either the Sales Tax or Value Added Tax (VAT) method, Receivables uses the Ship-To address on your invoice to determine whether it has rates available for the components of the Sales Tax Location flexfield. If a Ship-To address does not exist for a transaction, Receivables derives tax from the Bill-To information. For example, if a transaction has a Ship-To customer, but no Ship-To address, Receivables uses the Bill-To information along with the appropriate hierarchy to determine the tax.

Attention: You will notice that there is a table associated with each tax hierarchy. They show which system options you can set to let you skip certain levels of the hierarchy when determining your tax. For more information, see: Setting Up Tax: An Overview.

System Options for Sales Tax Hierarchy
Tax Defaulting System Options  
Customer Site 1
Customer 2
Product 3
Exception Rates System Options Value
Use Customer Exemptions Yes
Use Item Exemptions Yes
Use Item Tax Rate Exceptions Yes

System Options for VAT Hierarchy
Tax Defaulting System Options  
Customer Site 1
Customer 2
Product 3
Exception Rates System Options Value
Use Customer Exemptions Yes
Use Exemptions Yes

See Also

Setting Up Tax: An Overview

Calculating Tax

Tax Reports

Defining a Sales Tax Location Flexfield Structure

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