Setup for External Taxable Transactions

You can either use one of the taxable transaction spreadsheets or the Tax Entry Repository Data Upload spreadsheet to upload your tax transaction data.

These spreadsheets lets you to enter simple taxable journals to high volume transactions from external applications containing customers, suppliers, and other tax attributes for tax calculation.

Using spreadsheet-based entry options and existing tax configuration, you can calculate, account, and centrally report transactions taxes for tax on journals and transactions that are created in non-Oracle or proprietary applications. However, ensure the following setup is complete before using the spreadsheet-based entry options:

Subledger Accounting Methods
Configuration Owner Tax Options
Configuration Options and Service Subscriptions
Tax Liability Account
Tax Recoverable Account
Tax Rate Code

Subledger Accounting Methods

Ensure that the subledger accounting method associated with the ledger has the journal entry rule sets activated for the Tax subledger application.

The default Standard Accrual subledger accounting method has active journal entry rule set assignment for the tax subledger with purchase transaction and sales transaction journal event classes.

When a new accounting method is created or copied, ensure the journal entry rule set assignment exists and is active to create accounting for external tax transactions. The event classes can be added and activated to enable the tax subledger. Use the Manage Accounting Methods task in the Manage Accounting Rules task list to add the event classes to the accounting method.

External taxable transactions are categorized as:

Taxable journals: Taxable journals are general ledger journals that calculate tax through a user entered tax rate code. There is no third-party customer or supplier, or business unit. Transactions are associated with a ledger and a legal entity. First-party registration number is required for tax reporting.
Taxable transactions: Taxable transactions are Payables and Receivables subledger transactions. They are associated with a third-party customer or supplier, and an applicable business unit.

Configuration Owner Tax Options

Define configuration owner tax options for the tax event classes that are referenced in the external taxable transaction entry. Configuration owner tax options allow you to enable tax calculation and accounting for external taxable transactions. Ensure that you have selected the Allow tax applicability and Create accounting options. You must also define other key attributes such as, the configuration owner and effective dates.

The configuration owner for purchase or sales journals cannot be associated with a business unit. They must be associated with a legal entity or a global configuration owner.

Ensure both Allow tax applicability and Create accounting are selected to calculate tax and create the appropriate journal entries to post to the general ledger.

For purchase transactions, specify the Inclusive Treatment for Calculated Tax option. You can set it as:

Adjust: Modifies the value of item distributions passed for purchase transactions, if the tax calculated is inclusive.
Error: Fails the import to indicate that the item distribution amounts being passed are not correct due to the inclusive tax amount calculated.

Configuration Options and Service Subscriptions

For taxable journals, tax configuration content must have regime subscription of the relevant legal entity. When using sales and purchase journals as the event classes in your external transactions, use regime subscriptions with the applicable legal entity or ledger. Use the Manage Tax Regimes task to specify the subscription for tax content with the applicable legal entity.

Tax Liability Account

For sales transactions and sales journals, you must define a tax liability account with the appropriate tax rate. For sales journals, define the tax liability account in the context of a ledger only.

Tax Recoverable Account

For purchase transactions and purchase journals, you must define a tax recoverable account with the appropriate tax recovery rate. For purchase journals, define the tax recoverable account in the context of a ledger only.

Tax Rate Code

Tax journals require that the tax rate code exists in the relevant order- to-cash or procure-to-pay flows and set assignment. This is enabled by default, however, ensure that the rate code exists for the proper tax classification code set assignment.

The tax classification code set assignments must exist for the relevant flow and set to calculate tax for sales and purchase journals. When a tax rate is defined, the rate is available to both order-to-cash and procure-to-pay transactions in a common set assignment. However, you can restrict the rate code for a specific flow or set.