Sales tax

Destination sales tax mainly applies in North America and Canada. The tax rates are determined by the local authorities in the jurisdiction where the goods or services are received or consumed. In many cases, multiple jurisdictions have authority over the same location.

For example, the city, county, and state/province can each charge their own taxes and can each set their own rules for what is taxable and whether there are exceptions or maximum taxable amounts.

The destination sales-tax can consist of multiple parts and multiple rates. You can use a tax provider for the tax computation.

In North America, expense purchase tax is handled differently from the way it is handled outside North America. For details, refer to Expense purchase tax.

For sales tax, you must define tax codes for the lowest level tax jurisdiction that you must report. For example, if sales tax is levied by the city, the county, and the state, you must define tax codes for the cities. If no sales tax is levied by the city level, but county and state sales tax apply, you can define tax codes for the counties.

For transactions on which sales tax is levied by multiple jurisdictions, you can set up multiple tax codes.

If a type of tax in a country consists of several parts that must be paid to different tax authorities, you must define the tax as a multiple tax code for this country. For each part, you must create a multiple tax code line in the Multiple Tax Code Lines (tcmcs0535m000) session. LN assigns a sequence number to each line.

Next, you specify the tax rates for each multiple tax code line in the Multiple Tax Code Lines (tcmcs0535m000) session.

To determine the tax rates and calculate the sales tax amounts, LN uses the GEO code of the delivery address to link the tax code to a transaction. However, you cou can specify various types of sales tax exceptions and exemptions for specific transaction details and combinations of details.

Transactions with specific business partners, involving specific goods, and/or with their origin or destination in certain countries or areas, can be exempt from tax. Sales invoices for transactions that are exempt from tax must have zero tax amounts.

You can set up tax exemption for sales, for purchases, and for service activities.

For sold-to business partners which are exempt from tax, you must set up tax exemption, and you must specify the customer's tax exemption certificate number and a tax exemption reason. For details, refer to Setting up tax exemptions.

You can register your tax exemption certificates for purchases, including purchases with direct pay tax. Direct pay tax is a way for a buyer to directly submit a sales tax to the tax authority instead of first paying it to the supplier. To withhold tax from the invoice, you must provide your direct pay certificate number to the supplier.

In addition, you can set up a default exempt tax code for a warehouse or for all the warehouses of a logistic company. The Purchase Control sessions use this information to determine whether destination sales tax must be paid for the goods delivered at the warehouse.

For service activities, you can specify that specific cost components or types of service transactions, or work related to a service contract at specific sites, is exempt from tax. You must specify a tax exemption reason.

Direct pay tax is a way for a buyer to directly submit a sales tax to the tax authority instead of first paying it to the supplier. To withhold tax from the invoice, you must provide your direct pay certificate number to the supplier.

In various tax exception definition sessions, you can define exceptions and exemptions for direct pay tax.