Oracle EBTax Setups and Process for Payables Invoice Tax Calculations

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%.