Monday, June 2, 2014

How To Setup EBTax So Tax Is Calculated on Payable Invoice


Step 1: Create Tax Regime
Step 2: Create Tax
Step 3: Create Tax Status
Step 4: Create Jurisdiction
Step 5: Create Rate
Step 6: Enter Tax Accounts
Step 7: Create Tax Rules (Populate values for all defaults)
Step 8: Make Tax Available for Transaction
Step 9: Test the Tax

Pre-Requisite:
Check how the Party/OU has been setup
Tax Manager/Administrator > Parties > Party Tax Profiles

Query for the following:
Party Type: Operating Unit Owning Tax Content
Party Name: Vision Operations (Name of the OU you wish to setup for tax)
Click Go
Click View Tax Profile
 
Confirm if 'Use Subscription of the Legal Entity' is checked.

If this is checked, then the OU is set to use the subscription from Legal Entity. The regime is then subscribed (in a later step) to the First Party Legal Entity rather than the Operating Unit Owning Tax Content.

This is a one time setup and the value cannot be toggled. So enable this only after you determine you want to use this setup. 

In our case, for Vision Operations OU, this is NOT checked and therefore we need to set our Tax Regime up against the Operating Unit and NOT the First Party Legal Entity. (Step 1 below)

Step 1: Create Tax Regime
Tax Manager/Administrator > Tax Configuration > Tax Regimes
Click Create to enter a new Tax Regime.
We are going to create a United States regime.
  
Enter the following:
Field     
Value
Tax Regime Code
XXAA US REGIME
Name    
XXAA US REGIME
Regime Level     
Country
Country Name
United States
Effective From
01-Jan-2014
Parent Regime Code
NULL
Used to Group Regimes  
Unchecked

Click on Show Controls and Defaults
  

Enter settings for Controls and Defaults as follows:
Field
Value
Controls:

Allow Tax Recovery
Unchecked
Allow Override and Entry of Inclusive Tax Lines 
Checked
Allow Tax Exemptions
Checked
Allow Tax Exceptions
Checked
Defaults:

Tax Currency
USD
Minimum Accountable Unit
0.01 
Rounding Rule
Nearest
Tax Precision
2
Allow Multiple Jurisdictions
Unchecked
 Click Continue
 

Enter the following information:
Field
Value
Party Name
Operating Unit
Party Type
Operating Unit Owning Tax Content *
Configuration for Taxes and Rules
Common Configuration
Configuration for Product Exceptions
Common Configuration
Effective From
01-Jan-2014
* If ‘Use Subscription of the Legal Entity’ was checked in the prereq step then this would have been entered against the First Party Legal Entity and not the OU

Click on Finish
 
Ensure you see confirmation message:
 
Step 2: Create Tax
Tax Manager/Administrator > Tax Configuration > Taxes
Click on Create
 
Enter the following information:
Field
Value
Tax Regime Code
XXAA US REGIME (From LOV – Regime defined in Step 1)
Configuration Owner     
Global Configuration Owner
Tax Source
Create a New Tax
Tax
XXAA US TAX
Tax Name
XXAA US TAX
Tax Type
VAT
Geography Type
Country
Parent Geography Type
Country
Parent Geography Name
United States
Set as Offset Tax
Unchecked
Set Tax for Reporting Purposes
Unchecked
 Click on Show Controls and Defaults

 
Enter the following information:
Field
Value
Controls:

Allow Tax Inclusion
Unchecked
Allow Override and Entry of Inclusive Tax Lines
Checked
Allow Tax Rounding Override
Checked
Allow Override for Calculated Tax Lines
Checked
Use Legal Registration Number
Unchecked
Allow Multiple Jurisdictions

Allow Mass Creation of Jurisdictions
Checked
Defaults:
Checked
Allow Tax Rate Rules
Checked

 Click Apply.

View confirmation message:
 
Step 3: Create Tax Status
Tax Manager/Administrator > Tax Configuration > Tax Statuses
Click Create 

Enter the following information:
Field
Value
Tax Regime
XXAA US REGIME (From LOV in Step 1)
Tax
XXAA US TAX (From LOV in Step 2)
Tax Status Code
XXAA US STATUS
Name
XXAA US STATUS
Effective From
01-Jan-2014 (Defaults)
Set as Default Tax Status
Checked
Default Status Effective From
01-Jan-2014 *
* Does not default and is not required so remember to enter this.
Click Apply

View confirmation message:

Step 4: Create Jurisdiction
Tax Manager/Administrator > Tax Configuration > Tax Jurisdiction
Click Create

Enter the following information: 
Field
Value
Tax Jurisdiction Code
XXAA US JURISDICTION
Tax Jurisdiction Name
XXAA US JURISDICTION
Tax Regime Code
XXAA US REGIME (From LOV Step 1)
Tax        
XXAA US TAX (From LOV Step 2)
Geography Type
COUNTRY
Effective From
01-Jan-2014
Geography Name
United States
Default Tax Jurisdiction Settings:

Set as default Tax Jurisdiction
Checked
Default Effective From
01-Jan-2014
Click Apply

Ensure confirmation message is received.

Step 5: Create Rate
Tax Manager/Administrator > Tax Configuration > Tax Rates
Click Create

Enter the following information:
Field
Value
Tax Regime Code
XXAA US REGIME (From LOV Step 1)
Configuration Owner
Global Configuration Owner
Tax
XXAA US TAX (From LOV Step 2)
Tax Status Code
XXAA US STATUS (From LOV Step 3)
Tax Jurisdiction Code
XXAA US JURISDICTION (From LOV Step 4)
Tax Rate Code
XXAA US RATE
Rate Type
Percentage
Rate Periods:

Percentage Rate
20
Effective From 
01-Jan-2000
 Click on Rate Details button and scroll down

Enter the following:
Field
Value
Set as Default Rate
Checked
Default Effective Date
01-Jan-2000 
Click Apply

Note: This returns you to the Tax Rates page and the rate has not yet been saved, just the details for it.

Click Apply again.
 
Ensure confirmation message is received
 
Step 6: Enter Tax Accounts
Tax Manager/Administrator > Tax Configuration > Taxes
Query XXAA US Tax
Click Go

Click Tax Accounts

Search for Vision Operations OU and click create

Enter the Operating Unit and populate Tax Expense and Tax Recoverable/Liability accounts.
Click Apply.

Note this has not been saved at this point.

Click Apply again
 

Click Apply a third time
 
Step 7: Create Tax Rules (Populate values for all defaults)
Tax Manager/Administrator > Tax Configuration > Tax Rules
 Enter the following:
Field
Value
Configuration Owner
Global Configuration Owner
Tax Regime Code
XXAA US REGIME
Tax
XXAA US TAX
 Click Go to search for existing default rule

Click the pencil icon in the Set Default column to change any of the defaults defined

Update the defaults as follows:
Field
Value
Determine Place of Supply
Ship to, use bill to if ship to is not found
Determine Tax Applicability
Applicable
Determine Taxable Basis
STANDARD_TB
Calculate Tax Amounts
STANDARD_TC

Note: Direct Tax Rate Determination is used only for upgraded taxes so this is greyed out.  The last item, Determine Recovery Rate is also not updatable because this tax regime has not been setup to allow recoverable taxes.

Step 8: Make Tax Available for Transaction
Tax Manager/Administrator > Tax Configuration > Taxes
Query Tax             
Click on Update Pencil Icon

Check the box 'Make Tax Available for Transactions' 
Click Apply
 

This warning is ok since we know we didn’t enter an exchange rate type.
Click Yes and receive confirmation of changes saved

Step 9: Test the Tax
Payables > Invoices : Entry > Invoices

Enter Invoice for Supplier with a US Ship-To address
Enter Line information
Ensure the SHIP TO location at the line level contains a US location (As that is how we determine place of supply)

Click distributions
Enter Invoice distribution
Save

Go back to Invoices and click Calculate Tax
 
Tax line is created – click on Tax Details
 
You can see that the XX US REGIME has been applied and tax calculated at 20%.

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