Product Fiscal Classifications

Use product fiscal classifications to classify items for tax determination and reporting. Define a product group to use in tax product exemptions.

Define product fiscal classifications by associating them with an Oracle Fusion Inventory catalog, which in turn is used to group items using the standard Inventory functionality.

Set up the following options in the Inventory catalog:

• Don't select the Enable hierarchies for categories option.

• Select Items at leaf level in the Catalog Content field.

• Select the Allow multiple item category assignments option.

• Select the Enable automatic assignment of categories option.

• Select None in the Source Catalog field.

• Don't select a value in the Sharing Control field.

During transaction time, when the association with the catalog exists, the application automatically derives the default product fiscal classification code based on the items used on the transaction line. When no item is defined on the transaction line, you can manually enter the product fiscal classification on the transaction line during transaction time. Even the default product fiscal classification code is derived during the transaction time, it can be overridden if necessary. The overridden product fiscal classification code is used in the tax determination process.

While creating the product fiscal classification, use the number of levels to define the number of hierarchical levels to link the items to. Also, specify the number of the level of classification that is to be used in the tax rule setup. When creating the levels within the product fiscal classification, define the start position and number of characters for each level. During transaction time, this ensures that all items with the same values in the start position and the same number of characters are grouped into the same classification.

For example, set up the following code structure using the Inventory catalog for the country, Luxemburg:

Code	Name
LUG01	Goods
LUG0100	Normal Rated Goods
LUG0101	Zero Rated Goods
LUG0102	Exempt Goods
LUG0103	Reduced Rate Goods
LUG0103-01	Reduced Rate 1 Goods
LUG0103-02	Reduced Rate 2 Goods
LUG0103-03	Reduced Rate 3 Goods
LUS01	Services
LUS0100	Normal Rated Services
LUS0101	Zero Rated Services
LUS0102	Exempt Services
LUS0103	Reduced Rate Services
LUS0103-01	Reduced Rate 1 Services
LUS0103-02	Reduced Rate 2 Services
LUS0103-03	Reduced Rate 3 Services

The previous code structure is represented by three levels:

Level	Type Code	Type Name	Start Position	Number of Characters
1	LU Goods or Services	Luxemburg Goods or Service Level	1	5
2	LU Type of Goods or Services	Luxemburg Type of Goods or Service Level	1	7
3	LU Type of Reduced Rate	Luxemburg Type of Reduced Rate Goods or Service	1	10

Use the level two codes to link the items that need to be classified using Inventory catalog.

Use the product fiscal classification pages to define the tax regimes for which specific product fiscal classification are to be used. Also, define if the product fiscal classification is available to be used in the setup of tax product exceptions. To set up tax product exceptions, enable the Use in Item Exceptions option. You can only set up one product fiscal classification for a specific tax regime with the Use in Item Exceptions option enabled.

Adjust the number of levels by increasing the number of levels. It is not possible to decrease the number of levels once the record is stored. In addition, you need to attach tax regimes to every level that is used in the tax rules.

Tip: While setting up the product fiscal classification, use different levels so that all of the necessary tax rules can be defined at the highest level possible. This minimizes the needed number of tax rules.

In the previous example, the tax rule can use the level 1 product fiscal classification to differentiate between goods and services.

Product Fiscal Classifications in Tax Rules

The product fiscal classification tax determination factors allow you to use product fiscal classification in tax rules. A combination of determination factor class and determining factor represents these determination factors.

Use Product inventory linked as the determining factor class and the product fiscal classification type code or name as the determining factor. When creating the tax rule, the value is the name or description associated with the relevant level.

Product Fiscal Classifications at Transaction Time

When an item is defined on the transaction line, the application automatically derives the default product fiscal classification on the transaction line using the Inventory catalog. The primary Inventory category set is defined in the country defaults of the taxation country. You can override this default during transaction time. The overridden default is used in the tax determination process.

The product fiscal classification is stored in the tax reporting ledger and is available for reporting.