Apply Tax According to Customer Site

Set up tax so Order Management can add tax to a sales order according to your customer's physical site. This is the way you set up the default tax that Order Management applies on a sales order for most customers.

Here's an example of how you can set up tax.

Note

• A tax regime, such as the United States, contains tax jurisdictions, such as the Arizona Department of Revenue.

• The tax jurisdiction assess a tax on your sales according to its tax rate, and depending on your customer's address.

• For example, if the tax rate in the Arizona tax jurisdiction is 5%, and if the net price on the sales order is $100, then the tax is $5.

You have a wide range of choices when setting up tax, depending on your supply chain's tax requirements. For example, you can specify tax according to the tax jurisdiction that applies at the ship-to site, the bill-to site, or a range of other locations.

Here's the flow that you use to set up the example in this topic.

Here are the tasks you use.

Task	Description
1. Manage Tax Regimes	Create a tax regime named USA_TAX_REGIME for the United States.
2. Manage Taxes	Create a tax named STATE1 at the state level for Arizona.
3. Create Tax Jurisdiction	Create a tax jurisdiction for the state of Arizona.
4. Create Tax Rate	Create the 5% tax rate to apply for the STATE1 tax.

Each task maintains the tax hierarchy. For example:

• The tax rate is in the USA_TAX_REGIME and the Arizona jurisdiction.

• The Arizona jurisdiction and the STATE1 tax are in the USA_TAX_REGIME.

You create a relationship between your customer's site and the tax regime.

Summary of the Set Up

1. Create the tax regime.

2. Create the tax.

3. Create the tax status.

4. Create the tax jurisdiction.

5. Add the customer site.

6. Verify geography and collect data.

7. Test your set up.

For this example, assume.

• You are in the Vision Operations business unit.

• Your sales order must calculate tax according to the ship-to address on the sales order.

• You set up tax for site 1036 of your Computer Service and Rentals customer, and their ship-to address is 2164 Broadway Tempe, AZ 85282.

• The tax jurisdiction in Tempe charges a 5% tax.

For background details about how to set up tax, see Administering Tax Reporting on Oracle Help Center.

For other technical details, including lots of helpful screen prints, see Order Management Tax Best Practices and General Questions (Doc ID 2619517.1).

Create the Tax Regime

1. Go to the Setup and Maintenance work area, then go to the task.

   • Offering: Financials

   • Functional Area: Transaction Tax

   • Task: Manage Tax Regimes

2. On the Manage Tax Regimes page, click Actions > Create.

3. On the Create Tax Regimes page, set the values.

   Attribute	Value
   Tax Regime Code	US_TAX_REGIME
   Tax Regime Name	US_TAX_REGIME
   Regime Level	Country
   Country	United States
   Tax Currency	USD
   Minimum Accountable Unit	0.01
   Tax Precision	2
   Tax Inclusion Method	Standard Noninclusive Handling
   Allow Tax Rounding Override	Contains a check mark.
   Allow Override and Entry of Inclusive Tax Lines	Contains a check mark. Enable this option so the Order Entry Specialist can override inclusive tax on the order line.

4. In the Configuration Options and Service Subscriptions area, on the Configuration Options tab, set values, then click Save and Close > Done.

   Attribute	Value
   Party Name	FUSION_AP You must set up your party before you do this procedure.
   Party Type	First Party Legal Entity
   Country	United States
   Configuration for Taxes and Rules	Common Configuration with Party Overrides
   Configuration for Product Exceptions	Common Configuration

Create the Tax

1. On the setup page, go to the task.

   • Offering: Financials

   • Functional Area: Transaction Tax

   • Task: Manage Taxes

2. On the Manage Taxes page, click Actions > Create.

3. On the Create Tax page, set the values.

   Attribute	Value
   Tax Regime Code	US_TAX_REGIME
   Configuration Owner	Global Configuration Owner
   Tax	STATE1
   Tax Name	STATE1
   Geography Type	State
   Parent Geography Type	Country
   Parent Geography Name	United States
   Override Geography Type	US_STATE_ZONE_TYPE_101
   Tax Currency	USD
   Tax Minimum Accountable Unit	0.01
   Tax Precision	2
   Conversion Rate Type	Corporate
   Rounding Rule	Down

4. In the Controls and Defaults area, set the values.

   Attribute	Value
   Tax Inclusion Method	Standard Noninclusive Handling
   Allow override and entry of inclusive tax lines Allow tax rounding override Allow override of calculated tax lines Allow entry of manual tax lines	Make sure each of these options contain a check mark. They allow Order Management to modify tax at run time.
   Allow creation of multiple jurisdictions	Contains a check mark.
   Allow tax exceptions	Contains a check mark.
   Allow tax exemptions	Contains a check mark.

5. Click Tax Rule Defaults, then set the values.

   Attribute	Value
   Place of Supply	Ship to, Use Bill to If Not Found. You're setting tax according to the tax rate in the tax jurisdiction of the ship-to address. If Order Management can't find the ship-to address at run time, then it will use the tax rate that the tax jurisdiction applies at the bill-to address.
   Tax Applicability	Applicable
   Tax Registration	Ship-to Party
   Tax Calculation Formula	STANDARD_TC TC means tax calculation.
   Taxable Basis Formula	STANDARD_TB TB means taxable basis.

6. In the Indirect Defaults area, set the values.

   Attribute	Value
   Tax Jurisdiction	ST-AZ1 ST means state. AZ means Arizona.
   Tax Status	STANDARD
   Tax Rate	STD

Create the Tax Status

1. On the setup page, go to the task.

   • Offering: Financials

   • Functional Area: Transaction Tax

   • Task: Manage Tax Statuses

2. On the Manage Tax Statuses page, click Actions > Create.

3. On the Create Tax Status page, set the values, then click Save and Close > Done.

   Attribute	Value
   Tax Regime Code	US_TAX_REGIME
   Configuration Owner	Global Configuration Owner
   Tax	STATE1
   Tax Status Code	STANDARD
   Tax Status Name	STANDARD
   Set as Default Tax Status Allow tax exceptions Allow tax exemptions Allow tax rate override	Contains a check mark.
   Parent Geography Name	United States

Create the Tax Jurisdiction

1. On the setup page, go to the task.

   • Offering: Financials

   • Functional Area: Transaction Tax

   • Task: Manage Tax Jurisdictions

2. On the Manage Tax Jurisdictions page, click Actions > Create.

3. On the Create Tax Jurisdiction page, set the values.

   Attribute	Value
   Tax Jurisdiction Code	ST-AZ1
   Tax Jurisdiction Name	Arizona
   Tax Regime Code	US_TAX_REGIME
   Tax	STATE1
   Geography Type	STATE
   Geography Name	AZ
   Parent Geography Type	COUNTRY
   Parent Geography Name	United States
   Set as Default Jurisdiction	Contains a check mark.

4. Click Save.

   You must click save before you do the next step.

5. On the Associated Jurisdiction Tax Rate Periods tab, click Create.

6. On the Create Tax Rate page, set values.

   Attribute	Value
   Configuration Owner	Global Configuration Owner
   Tax Status Code	STANDARD
   Tax Rate Code	STD-DEFAULT
   Tax Rate Type	Percentage
   Order to Cash Procure to Pay Expenses	Contains a check mark.

7. In the Rate Periods area, set the values, then click Save and Close.

   Attribute	Value
   Rate Percentage	5
   Set as Default Rate	Contains a check mark.

8. On the Edit Tax Jurisdiction page, notice that the Associated Jurisdiction Tax Rate Periods contains the STD-DEFAULT rate you just created, then click Save and Close > Done.

Create the Standard Tax Rate

1. On the setup page, go to the task.

   • Offering: Financials

   • Functional Area: Transaction Tax

   • Task: Manage Tax Rates and Tax Recovery Rates

2. On the Manage Tax Rates and Tax Recovery Rates page, click Actions > Create.

3. On the Create Tax Rate page, set values.

   Attribute	Value
   Tax Regime Code	US_TAX_REGIME
   Configuration Owner	Global Configuration Owner
   Tax	STATE1
   Tax Status Code	STANDARD
   Tax Jurisdiction Code	ST-AZ1
   Tax Rate Code	STD STD means standard.
   Tax Rate Type	Percentage
   Order to Cash Procure to Pay Expenses	Contains a check mark.

4. In the Rate Periods area, set the values, then click Save and Close > Done.

   Attribute	Value
   Rate Percentage	10
   Set as Default Rate	Doesn't contain a check mark.

Add the Customer Site

Use the Manage Customers task to create a site for your Computer Service and Rentals customer. You specify the purpose as ship-to so you can use the ship-to address on the sales order to determine the tax to apply.

Try it.

1. On the setup page, go to the task.

   • Offering: Financials

   • Functional Area: Customers

   • Task: Manage Customers

2. On the Manage Customers page, search for the value.

   Attribute	Value
   Organization Name	Computer Service and Rentals

3. In the search results, in the Sites area, click Actions > Create.

4. On the Create Account Site page, set the values.

   Attribute	Value
   Account Address Set	Vision Operations Set
   Country	United States
   Site Number	1036
   Address Line 1	2164 Broadway
   City	TEMPE
   State	AZ
   Postal Code	85282

5. In the Address Purposes area, click Actions > Add Row, set the values, then click Save and Close > Done.

   Attribute	Value
   Purpose	Ship To

Verify Geography and Collect Data

1. On the setup page, go to the task.

   • Offering: Financials

   • Functional Area: Enterprise Profile

   • Task: Manage Geographies

2. On the Manage Geographies page, search for the value.

   Attribute	Value
   Country Name	United States

3. In the search results, click the row that has United States in the Country Name column, then click Actions > Manage Geography Validation.

4. On the Manage Geography Validation page, in the Geography Mapping and Validation area, verify the values for the State.

   Geography Type	Map to Attribute	Tax Validation
   State	State	Contains a check mark.

Collect Data

1. Go to the Plan Inputs work area.

   Don't use the Plan Inputs task that's available in the Setup and Maintenance work area. Use the Plan Inputs work area instead.

2. In the Plan Inputs work area, click Tasks > Collect Planning Data.

3. In the Collect Planning Data dialog, set your source system, then move reference entities to selected entities.

   • Customer

   • Geographies

   • Organizations

4. Click Submit.

For details, see Collect Planning Data for Order Management.

Test Your Set Up

1. Go to the Order Management work area and create a sales order.

   Attribute	Value
   Customer	Computer Service and Rentals
   Business Unit	Vision Operations
   Ship-to Address	2164 Broadway, Tempe, AZ, 85282

2. Add an order line.

   Attribute	Value
   Item	AS54888
   Quantity	1
   Amount	2,500

3. Click Actions > Reprice Order.

4. Click the total at the top of the sales order, then verify that the tax rate is 5%, which is the STD-DEFAULT rate you set up according to the ship-to address.

   Attribute	Value
   Total List Price	2,500.00
   Discount	0.00
   Total Net Price	2,500.00
   Shipping	0.00
   Total Tax	125.00 125 is 5% of 2,500, so this rate is correct.
   Total Credit	0.00
   Pay Now	2,625.00

5. Change the ship-to address to any other value, then click Actions > Reprice Order.

6. Click the total at the top of the sales order, then verify that the tax rate is 10%, which is the STD rate you set up to apply when the ship-to address isn't 2164 Broadway, Tempe, AZ, 85282.

   Attribute	Value
   Total List Price	2,500.00
   Discount	0.00
   Total Net Price	2,500.00
   Shipping	0.00
   Total Tax	250.00 250 is 10% of 2,500, so this rate is correct.
   Total Credit	0.00
   Pay Now	2,750.00