Setting Up Tax Rates

Set up tax rates for your tax statuses and tax jurisdictions. For tax statuses, set up a tax rate record for each applicable tax rate that a tax status identifies. For tax jurisdictions, set up tax rate records to identify the tax rate variations for a specific tax within different tax jurisdictions. For example, a city sales tax for a state or province may contain separate city tax jurisdictions, each with a specific rate for the same tax.

You can also define tax recovery rates to claim full or partial recovery of taxes paid. 

You can define tax jurisdiction and tax status rates as a percentage or as a value per unit of measure. For example, a city may charge sales tax at a rate of 8% on most goods, but may levy a duty tax with a special rate of $0.55 per US gallon on fuel. Values per unit of measure are in the tax currency defined for the tax.

You define tax rate codes and rate detail information per rate period. Rate periods account for changes in tax rates over time. A tax rate code can also identify a corresponding General Ledger taxable journal entry.

Prerequisites

Before you can set up tax rates, you may need to complete one or more of these tasks:

• Set up tax statuses. (mandatory)
• Set up tax transaction type lookup codes. (optional)
• Set up an offset tax. (optional)
• Set up first parties to self-assess taxes. (optional)
• Set up tax recovery rates. (optional)
• Set up tax jurisdictions. (optional)
• Set up tax reporting types. (optional)
• Set up primary and secondary tax recovery types. (optional)
• Set up units of measure. (mandatory, for quantity rate types)
• Set up tax recovery rules. (optional)

Set up a Tax Rate

• Navigate to the Create Tax Rate page.

• Enter the tax regime code. If you are setting up tax rates from within a tax jurisdiction, this information defaults from the tax jurisdiction.

• Enter the configuration owner, tax, and tax status code.

• If this is a tax jurisdiction rate, enter the tax jurisdiction code.

• Enter a tax rate code to identify this tax rate. Use a coding convention that is in keeping with the tax regime, tax, and tax status.

• Select the rate type.

• Enter the rate:

• If the rate type is Percentage, enter the percentage rate.

• If the rate type is Quantity, enter the unit of measure (UOM) and the quantity rate. The quantity rate is the value per UOM in the tax currency.

Note: You can enter either a positive or negative rate. If this is an offset tax rate, you must enter a negative rate.

• Enter the effective date range for this rate. If you do not enter an effective to date, then this rate remains in effect indefinitely and you cannot define another rate period.

• Navigate to the Tax Rate Details page. Updates to tax rate details are for the tax rate and period.

• In the Tax Rate Name field, enter a name or descriptive phrase to use for this tax rate and tax rate period.

• In the Tax Transaction Type field, enter a tax transaction type to use for this tax rate period.

• You can use lookups to set up tax transaction types and assign them to tax rate codes. Use tax transaction types to define local tax authority codes both for reporting purposes and for controlling which rates appear on an invoice.

• Check the Internet Expenses Enabled box to use this tax rate for this period on expense reports.

Note: If you want to update this tax rate code for expense reporting at a later time, create a lookup code for this tax rate. You must use the tax rate code and name as the lookup code and name.

• Enter a default recovery rate code to use for this tax rate. The effective dates of the tax rate and recovery rate must overlap. The default recovery rate applies if the recovery rate rules cannot determine an applicable recovery rate at transaction time. 

• Enter a rule code of recovery rate to use to determine the tax recovery rate. If the tax recovery rule that you select does not apply to the transaction, then E-Business Tax uses the default recovery rate. 

• Select the default recovery settlement: Immediate - Tax recovery is available at invoicing; Deferred - Tax recovery is available only after the invoice is paid.

Note: If the default recovery settlement is Deferred, then you must

• set up an interim tax account for this tax rate to record the tax recoveries or liabilities that accrue prior to payment. Once you set up an interim tax account for this tax rate, you cannot change the recovery settlement to Immediate. 

• If this tax has an associated offset tax, enter the offset rate code. At transaction time, this rate is used as the offset rate.

• If applicable, set this tax rate as the default tax rate for the tax status belonging to this rate period, and enter the effective dates that this tax rate is the default tax rate. This rate defaults to transaction lines only when there are no tax rate rules defined, or when no existing tax rate rule applies to the transaction. 

• If you enabled the Allow Override and Entry of Inclusive Tax Lines option at the tax level, then in the Allow Tax Inclusion field define the nature of tax inclusive handling for this tax rate.

Note: The tax inclusive handling setting at the tax rate level takes precedence over all other tax inclusive handling settings.

• Check the Allow Tax Exemptions box to create tax exemptions for your customers for this tax rate. 

• Check the Allow Tax Exceptions box to create special tax rates for specific products for this tax rate. 

• Check the Allow Ad Hoc Rate box to let users override the default tax rate on individual tax lines. You can only set this option if the tax status associated with this tax rate has the option Allow Tax Rate Override enabled.

• If you enabled manual updating for this tax, then use the Adjustment for Ad Hoc Amounts field to define which value is adjusted when the tax amount changes: Taxable basis or Tax rate.

• If you associated tax or legal justification reporting types with tax rate, enter any applicable tax reporting codes.

• Enter or update tax accounts for this tax rate for the applicable business establishments in your company.