How Tax Inclusiveness Hierarchy Is Determined

Configure your tax setup to include the calculated tax amount with the item line amount.

The option for configuring the inclusiveness is available on the tax and tax rate definition and the third party and legal reporting unit tax profiles on the tax registration and general data tabs.

Settings That Affect Tax Inclusiveness

Set up the inclusive options in the following pages:

• Create or Edit Tax page: Specify the tax inclusion method on the Default and Controls tab. The handling of this field is dependent on the value of the Allow override and entry of inclusive tax lines option at the tax regime level. If the option isn't selected at the tax regime level, the Tax Inclusion Method field is display-only. The value displayed is set at the tax regime level.

• Create or Edit Tax Rate page: Specify the tax inclusion method on the Main Details tab. The handling of this field is dependent on the value of the Allow override and entry of inclusive tax lines option at the tax level. If the option isn't selected at the tax level, the Tax Inclusion Method field is display-only. The value displayed is set at the tax level.

• Create or Edit Tax Registration page: Select Set Invoice Values as Tax Inclusive option for the third party, third-party site, and legal reporting unit tax profiles.

• Create or Edit Third Party Tax Profile and Create or Edit Third Party Site Tax Profile pages: Select Set Invoice Values as Tax Inclusive option on the General tab for the third party or third-party site.

• Create or Edit Legal Reporting Unit page: Select Set Invoice Values as Tax Inclusive option on the General tab for the legal reporting unit.

How Tax Inclusiveness Hierarchy Is Determined

The tax determination process uses a hierarchy approach to evaluate the options selected in your tax configuration and applies it on the taxes calculated on a transaction.

The hierarchy sequence for processing the inclusiveness for a tax is:

1. If the transaction involved is a Receivable transaction then check for the value in the Tax Amount Included field within the invoice line details. The available values are:

   • No: All the taxes calculated on the invoice line are treated as exclusive of the item line amount.

   • Yes: All the taxes calculated on the invoice line are treated as inclusive of the item line amount.

   • Use tax rate code: The tax setup defined is considered for analyzing the inclusiveness.

2. If the transaction involved isn't a Receivable transaction or if the Receivable transaction uses the Use tax rate code option then check for the value specified in the Tax Inclusion Method field for the processed tax rate code. The available values are:

   • Standard noninclusive handling: The referred tax gets calculated as exclusive of the transaction line amount.

   • Standard inclusive handling: The referred tax gets calculated as inclusive of the transaction line amount.

   • Special inclusive handling: The referred tax gets calculated as inclusive of the transaction line amount. However, the line amount is considered the taxable basis rather than the adjusted line amount, which is considered for the Standard inclusive handling value.

   • Blank: Process next step.

3. Check the value specified in the Set Invoice Values as Tax Inclusive field on the tax registration record of the third-party site tax profile for the processed registration party. The available values are:

   • No: The referred tax gets calculated as exclusive of the transaction line amount.

   • Yes: The referred tax gets calculated as inclusive of the transaction line amount.

   • Blank: Process next step.

   If the processed registration party is the first party, the registration record for the tax available within the legal reporting unit tax profile is considered. If the value is set to blank then step 7 is processed.

4. Check the value specified in the Set Invoice Values as Tax Inclusive field on the tax registration record of the third-party tax profile for the processed registration party. The available values are:

   • No: The referred tax gets calculated as exclusive of the transaction line amount.

   • Yes: The referred tax gets calculated as inclusive of the transaction line amount.

   • Blank: Process next step.

5. Check the value specified in the Set Invoice Values as Tax Inclusive field on the General tab of the third-party site tax profile. The available values are:

   • No: The referred tax gets calculated as exclusive of the transaction line amount.

   • Yes: The referred tax gets calculated as inclusive of the transaction line amount.

   • Blank: Process next step.

6. Check the value specified in the Set Invoice Values as Tax Inclusive field on the General tab of the third-party tax profile. The available values are:

   • No: The referred tax gets calculated as exclusive of the transaction line amount.

   • Yes: The referred tax gets calculated as inclusive of the transaction line amount.

   • Blank: Process next step.

7. Check for the value specified in the Tax Inclusion Method field of the tax. The available values are:

   • Standard noninclusive handling: The referred tax gets calculated as exclusive of the transaction line amount.

   • Standard inclusive handling: The referred tax gets calculated as inclusive of the transaction line amount.

   • Special inclusive handling: The referred tax gets calculated as inclusive of the transaction line amount. However, the line amount is considered the taxable basis rather than the adjusted line amount, which is considered for the Standard inclusive handling value.