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.

Using a tax provider application

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

Expense purchase tax

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.

Sales tax codes

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.

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 Mehrstufige Steuercodes (tcmcs0535m000) session. LN assigns a sequence number to each line.

The tax on the multiple tax code lines can be calculated in these ways:

• Parallel

  Individually for each line

• Kumuliert

  Including the tax amounts of previous lines

Next, you specify the tax rates for each multiple tax code line in the Mehrstufige Steuercodes (tcmcs0535m000) session.

Determining the sales tax code

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 can specify various types of sales tax exceptions and exemptions for specific transaction details and combinations of details.

To determine the tax code, LN searches for the most specific tax code defined for combinations of these transaction details:

• Country
• Business partner
• Item
• Item group
• GEO code

Because addresses determine the tax amounts, if you select the Steuer in HP-Salden berücksichtigen check box in the Parameter Allgemeine Daten (COM) (tccom0000s000) session and you use a tax provider, you must rebuild the open order balances when you change the addresses of:

• Business partners
• Logistic companies
• Departments
• Warehouses

Tax exceptions

You can define exceptions to the default tax codes for:

• Business partners, items, and so on.
• Combinations of place of origin and order acceptance location.

Tax exemptions

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.

Tax exemptions for sales

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.

Tax exemptions for purchases

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 Einkauf sessions use this information to determine whether destination sales tax must be paid for the goods delivered at the warehouse.

Tax exemptions for service

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

Direct pay

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.