Direct Tax Rate Rules

Define tax rules on an exception basis to handle requirements that foundation tax setup can't address.

You can define tax status rules, tax rate rules, direct tax rate rules, account-based direct tax rate rules, or tax classification-based direct tax rate rules to derive the applicable tax rate.

The tax determination process uses direct tax rate rules to determine tax applicability, tax status, and tax rate. The tax determination process uses a tax rate rule to determine the tax rate once the tax status is determined. A direct tax rate determination rule is a good choice if there are specific requirements to drive a specific tax, tax status, and tax rate and no variation in tax status or tax rate is required.

Tip: If tax applicability is impacted by the tax rate but not the tax law, set up a tax status rule to point to a different tax status and use a default tax rate associated with that tax status. If the tax status doesn't need to be unique a tax rate rule can drive a specific tax rate but keep the tax applicability and tax status based on existing rules.

Direct Tax Rate Determination

Use the Direct Tax Rate Determination rule type for situations where you don't need to create separate tax rules for tax applicability, tax status, and tax rate. The following must occur for a Direct Tax Rate Determination rule to be applicable:

The Direct Tax Rate Determination rule must evaluate to true
The tax rate code must be defined for the product family
The place of supply must evaluate successfully except in the case of migrated taxes when Allow multiple jurisdictions is selected

If a Direct Tax Rate Determination rule is not evaluated successfully, then Determine Tax Applicability rules are processed to determine if tax is applicable. If the tax is not applicable then the determination process ends for tax.

Account-Based Direct Tax Rate Determination

Account-based rules are direct rate rules that are driven by the line account of the transaction. A matching account drives the applicability, tax status, and tax rate defined on the tax rule. These tax rules apply only when the regime determination method is Determine applicable regimes and the configuration owner tax option for the event class has the Enforce from account option selected. These tax rules are evaluated after standard applicability rules. If a standard applicability rule evaluated the tax to Not applicable then it can't be applicable through an Account-Based Direct Tax Rate Determination rule.

Tax Classification-Based Direct Tax Rate Determination

Use the Tax Classification-Based Direct Tax Rate Determination rule when the regime determination for the configuration owner tax option is defined as STCC (standard tax classification code). This setup is primarily intended for migrated tax classification codes, specifically tax classification groups. The tax classification code populated on the transaction line drives the tax determination and tax rate directly. A default tax rate associated to a tax rate code is not applicable in this case. Tax classification codes are created automatically as user-configurable lookup codes when you save a tax rate definition.

Note: The Tax Classification-Based Direct Tax Rate Determination rule is an extension to an existing migrated configuration where the tax calculation was based on tax classification codes.