Apply Tax Before You Calculate a Discount
Apply tax before you calculate a discount on the item.
Some discounts are taxable while others aren't, depending on the tax authority where you apply the tax. Either way, you can set up tax to meet your tax requirements.
Summary of the Setup
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Create taxable basis formula.
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Create a tax determining factor set.
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Create the condition set.
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Create the tax rule.
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Test your set up.
Create Taxable Basis Formula
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Create a discount list in the Pricing Administration work area, assign it to your item, then add it to a pricing strategy.
For details, see Manage Discount Lists.
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Do the tax set up. For details, see Apply Tax According to Customer Site.
You will reuse a number of objects from that topic, such as US_TAX_REGIME, the 5% tax rate, and the STATE1 tax.
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Go to the Setup and Maintenance work area, then go to the task:
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Offering: Financials
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Functional Area: Transaction Tax
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Task: Manage Tax Formulas
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On the Manage Taxable Basis Formulas page, click Create.
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On the Create Taxable Basis Formula page, set the values, and then click Save and Close > Done.
Attribute
Value
Configuration Owner
Global Configuration Owner
Tax Formula Code
Tax Before Discount
Tax Formula Name
Tax Before Discount
Taxable Basis Type
Assessable Value
Tax Regime Code
US_TAX_REGIME
Tax
STATE1
Create a Tax Determining Factor Set
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On the Setup page, go to the task.
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Offering: Financials
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Functional Area: Transaction Tax
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Task: Manage Tax Determining Factor Sets
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On the Manage Tax Determining Factor Sets page, click Create.
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On the Create Tax Determining Factor Set page, set the values.
Attribute
Value
Tax Determining Factor Set Code
TAX_BEFORE_DISCOUNT
Tax Determining Factor Set Name
TAX_BEFORE_DISCOUNT
Set Usage
Tax Rules
Tax Regime Code
US_TAX_REGIME
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In the Associate Tax Determining Factors area, set the values, then click Save and Close > Done.
Attribute
Value
Determining Factor Class
Transaction Generic Classification
This value specifies that you will use the input from a transaction to set the tax rate. A sales order is a type of transaction.
Determining Factor Name
Transaction Business Category
Create the Condition Set
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On the Setup page, go to the task.
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Offering: Financials
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Functional Area: Transaction Tax
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Task: Manage Tax Condition Sets
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On the Manage Tax Condition Sets page, click Create.
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On the Create Tax Condition Sets page, set the values.
Attribute
Value
Tax Condition Set Code
DISCOUNT CONDITION SET
Tax Condition Set Name
DISCOUNT CONDITION SET
Tax Determining Factor Set Code
TAX_BEFORE_DISCOUNT
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In the Tax Condition Set Details area, set the values, then click Save and Close > Done.
Attribute
Value
Tax Determining Factor Class
Transaction generic classification
Tax Determining Factor Name
Transaction Business Category
Operator
Equal To
Value or Start From Range
SALES_TRANSACTION
Create the Tax Rule
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On the Setup page, go to the task.
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Offering: Financials
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Functional Area: Transaction Tax
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Task: Manage Tax Rules
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On the Manage Tax Rules page, click Actions > Create.
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On the Create Determine Tax Applicability Rule page, set the values.
Attribute
Value
Configuration Owner
Global Configuration Owner
Tax Regime Code
US_TAX_REGIME
Tax
STATE1
Rule Code
TAX_BEFORE_DISCOUNT
Rule Name
TAX_BEFORE_DISCOUNT
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In the Tax Determining Factor Set area, in the Code attribute, set the value, then click Next.
Attribute
Value
Code
TAX_BEFORE_DISCOUNT
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On the Create Determine Tax Applicability Rule page, in the Tax Condition Set area, set the values, then click Save and Next.
Attribute
Value
Tax Condition Set Code
DISCOUNT CONDITION SET
New Condition Set Order
1
Result
Applicable
Enabled
Contains a check mark.
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On the Edit Determine Tax Applicability Rule page, in the Rule Status and Order area, add a check mark to the Enabled attribute, then click Submit > Done.
Test Your Set Up
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Go to the Order Management work area and create a sales order.
Attribute
Value
Customer
Computer Service and Rentals
Business Unit
Vision Operations
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Add an order line.
Attribute
Value
Item
AS54888
Quantity
1
Amount
2,500
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Click Actions > Reprice Order.
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Click the total at the top of the sales order, then verify that Order Management applies the tax rate according to the total list price, not the net price.
Attribute
Value
Total List Price
2,500.00
Discount
250.00
Total Net Price
2,250.00
Shipping
0.00
Total Tax
125.00
125 is 5% of 2500.
Total Credit
0.00
Pay Now
2375.00