The Extended method to set up tax exemptions

To set up tax exemptions using the Extended method, use the following sessions:

  1. Tax Codes by Country (tcmcs0136s000)
    Define and approve the exempt tax codes as described in Setting up tax codes by country. The tax rate must be zero percent. To print a reference to the tax law on the invoices or purchase order acknowledgements, link a text to the tax code.
  2. Reasons (tcmcs0105m000)
    Optionally define Tax Exemption reasons. If you use a tax provider, you must define tax exemption reasons. LN automatically prints the exempt reasons on the sales invoices.
  3. Company Sets (tctax0170m000)
    Define one or a number of financial company sets.
  4. Companies by Company Set (tctax0171m000)

    Add financial companies to the company set. Ensure that each financial company belongs to only one financial company set. To set up tax exemptions for a single financial company, create a company set that contains only one company.

  5. For the financial company set, set up the tax exemptions in one of the following ways:

    • Tax Exceptions by Country (tctax1100m000)
      If the tax exemption applies to a specific state or province, you must use this session.
    • Tax Exceptions by Country Set (tctax1101m000)

      If the tax exemption applies to several countries, use the Tax Exceptions by Country Set (tctax1101m000) sessions.

      • First, in the Country Sets (tctax0120m000) session, define tax country sets and in the Countries by Country Set (tctax0121m000) session, add countries to the tax country set.
      • Next, run the Tax Exceptions by Country Set (tctax1101m000) session to set up tax exemptions for the country set.

  6. Define the exemption

    In the Tax Exceptions by Country (tctax1100m000) or the Tax Exceptions by Country Set (tctax1101m000) session, enter the following details:

    • The sold-to or the buy-from business partner.
    • Select the Exempt check box or, in the Exempt field, select Yes, as applicable.
    • Enter the transaction details as applicable. If a detail is not relevant, leave the field empty.
    • In the Exempt Certificate field, you must enter the sold-to business partner's tax exemption certificate or, for purchase orders, enter your own tax exemption certificate or direct pay certificate.
    • In the Exempt Reason field, enter the reason why the sold-to business partner or your own company is exempt from sales tax.
    • In the Effective Date and Expiry Date fields, specify the period during which the tax exemption certificate is valid. Only one exempt reason and certificate number combination can be valid at a time. You can set up several tax exemption certificates with successive expiry dates for one exempt reason.
    • To set up tax exemption for Purchase orders for a warehouse, specify the warehouse in the Warehouse field. For the Exemptions search orders, LN first checks whether you defined an exemption for the warehouse.
    • If you use a tax provider, you can define exempt tax codes for purchases by country and state/province. Specify the state or province in which the goods are issued or delivered in the State / Province from and the State / Province from fields.

  7. In the Tax Parameters (tctax0100m000) session, select the following details:

    • Tax Exempt Level
      Extended, to indicate that you defined exempt tax codes for specific business partners and transactions details.
    • Search Order

      Select one of the following values:

      • In one of the Search Order fields, select Exemptions by Country or Exemptions by Country Set, as applicable.
      • If, in addition to the tax exemptions, you define tax exceptions, you must also select Exceptions by Country or Exceptions by Country Set in a Search Order field.
  8. Use the Test Tax Model (tctax8100m000) session to test the resulting tax code and tax country in various situations, and make the necessary adjustments.

Related topics