Considerations for Defining Tax Configuration for Transaction Taxes

To determine how to set up your tax configuration, you must first analyze your requirements.

Analyzing Your Transaction Tax Requirements

When you analyze your transaction tax requirements and use Oracle Fusion Tax and other Oracle Fusion applications to implement a solution, you must consider the following questions:

Question	Consideration	Impact to Tax Configuration
Who am I?	You must first answer questions about yourself and your relationship to the legal and regulatory agencies that enable you to operate in one or more counties.
Where do I have operations and businesses?	Identify the countries: Which you operate in Where you are legally registered Where you have subsidiary companies that are legally registered or have a legal presence	Use Oracle Fusion Legal Entity Configurator to capture information about your legal entities and legal registration.
What taxes am I subject to?	Analyze your tax environment for each of the countries in which you operate.	Set up your tax regimes, taxes, and tax jurisdictions according to the tax requirements for each country.
What are the operations and businesses that I have?	Consider the types of operations and businesses in which you are engaged and the countries where you have legal entities or reporting units. The following may impact your taxability: The type of industries for which you work. For example, mining, telecommunications, and pharmaceuticals. The kind of operations in which you engage. For example, trading, manufacturing, and services. The scale of your operations. For example, your turnover, company size, and growth.	Use the classifications feature to categorize or classify your first parties under various classification schemes. In analyzing your operations, you can associate the three main classifications of a transaction to: What you do: Use transaction fiscal classifications. What products you buy or sell: Use product fiscal classifications. Who your customers and suppliers are: Use party fiscal classifications.
What do I do?	Identify and classify the transactions that you perform. For example, do you primarily sell physical goods? If you do, do you manufacture them, or do you buy and sell them without additional manufacturing? Do you sell these goods in another state or province? Do you export these goods? Do you provide or use services?	Create fiscal classifications to classify and categorize your transactions in a common manner across your organization. Use these fiscal classifications in tax rules to obtain the appropriate tax result.
What products do I buy or sell?	Determine the products that you buy and sell. The taxes that you are subject to depend on them. For example, you must register for, and therefore collect and remit service taxes only if you provide taxable services. If you manufacture goods for export, you may not be subject to taxes on the purchases that are part of the manufacture of such goods.	Where Oracle Fusion Inventory is installed use the Inventory Catalog feature with Oracle Fusion Tax product fiscal classifications and intended use functionality to classify the taxable nature and intended use of the items. You can then define tax rules using these classifications to obtain the appropriate tax result. To address classification needs of transactions that do not use inventory items, define product category and noninventory based intended use fiscal classifications.
Who are my customers and suppliers?	Determine the types of customers and suppliers. They can affect the taxes to which you are subject, the tax status, or tax rate that applies. For example, you are a UK based company that supplies physical goods to another country, which is also a member of the European Union. The transaction rate for UK VAT is dependent on whether the customer is registered for VAT in the country to which the supply is made.	Use the party classifications feature to categorize your customers and suppliers. You can use the classifications while defining tax rules to derive the appropriate tax result. You can create a party fiscal classification by assigning a Trading Community Model class category to a predefined party fiscal classification type code. The Trading Community Model class codes defined under the class category become fiscal classification codes belonging to the party fiscal classification type. You can create a hierarchy of party fiscal classification types to reflect the levels of codes and subcodes within the Trading Community Model classification.