Oracle E-business tax – How to create a rule to make tax calculate differently Andrea Auld Senior Principal Instructor Oracle University October 22, 2018 This is a Title Slide with Picture and Product, Service, or Industry Logo slide ideal for including a picture and product/service/industry or org logo with a brief title, subtitle and presenter information. To Replace the LOGOs on this sample slide: Right-click a sample LOGO and choose Change Picture. Navigate to the location where the new logo is stored, select desired logo file and click on the Open button to replace the sample logo. The Presented with FPO logo placeholder box can be copy and paste to any of the Title Slides. Confidential – Oracle Internal/Restricted/Highly Restricted

What you’ll learn In this presentation we will cover: Basic EBTax setup – Regime, Tax, Status, Rate, Jurisdiction, Defaults for the steps of the Tax Determination process Creating a rule to make tax not applicable if the account segment of the charge account meets specific criteria -Creating a Determining Factor Set -Creating a Condition Set -Creating a rule on the Determine Tax Applicability Step -Testing the Rule to assure that no tax line is generated. Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax Party Tax Profile Each operating unit can be associated with one or more tax regimes. Usually an operating unit is associated with one tax regime for the country in which the operating unit is located. Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax Tax Regime/Regime to Rate Flow A Tax regime is simply a “bucket” of all of the taxes which could potentially apply to a transaction line. To view the list of taxes contained within a tax regime, you can query up the Tax regime definition and click on the Regime to Rate Flow icon. Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax - Tax Regime/Regime to Rate Flow In our classroom example, the US-SALES-TAX-101 tax regime which is attached to the Vision Operations operating unit has four taxes – STATE, COUNTY, CITY, and LOCATION. So each of those taxes COULD potentially apply for a given transaction line. The Ebtax engine will search for regimes attached to the operating unit in which the document is created, and from that tax regime will build a list of “Candidate taxes”. Then for EACH candidate tax, the tax engine will execute the steps of the tax determination process to determine if the 1) If the tax is applicable, 2) Which address should be used to determine the jurisdiction field on the tax line, 3) Which STATUS to use on the tax line, 4) Which RATE to use on the tax line, 5) What taxable BASIS to use, 6) How to perform the tax CALCULATION Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax - Tax Regime Definition Our US-SALES-TAX-101 tax regime is effective on the date of a transaction, and does not allow tax recovery, so it would not be necessary to define recovery rates like it would be for a VAT Tax. Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax - Tax Regime Definition Our US-SALES-TAX-101 tax regime is attached to the Vision Operations operating unit within which we create AP invoices. Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax - Tax Definition The STATE tax is one of the Four taxes contained within the US-SALES-TAX-101 tax regime. The STATE tax is associated with a Geography type of US_STATE_ZONE_TYPE_101. which contains multiple zones, each of which corresponds to a range of zip codes associated with the address in which goods are received for we are being billed on an AP invoice. Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax - Tax Definition The STATE tax allows creation of Exemptions and Exceptions (Which we cover in the Ebtax class) Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax - Tax Status Definition Each tax can have one or more STATUSes. The STATE tax has a status called STANDARD, which is identified as the Default status for the STATE Tax. So, if the STATE tax is determined to be applicable for a transaction line, then the STANDARD status will be used on the tax line because it is the default (unless we created a tax rule on the Determine Tax Status step to specify conditions under which to use a different status) Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax - Tax Jurisdiction Definition Each tax can have one or more jurisdictions. Our STATE tax would probably have 50 jurisdictions – one for each state. The ST-330000000 jurisdiction is associated with the US- STATE_ZONE_TYPE geography type, and one of the geographies within that zone type is the geography that contains the zip code for New York city. Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax - Tax Jurisdiction Definition If we look at the ST-330000000 jurisdiction in the US_STATE_ZONE_TYPE zone type, we can see that it corresponds to a range of zip codes which would be associated with OUR location into which the goods were received for which we are now being billed by the vendor. Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax - Tax Rate Definition The tax rate for the ST-330000000 jurisdiction for the STATE tax is 4.25%. Note that each tax rate can have one or more percentages and each percentage has an effectivity date range. So if a law is passed to raise the percentage to 5.0% as of 01-JAN-2200, there would be another record in this screen. (NOTE that it is a bad idea to ever end date anything in Ebtax unless you are absolutely sure because end dates usually cannot be changed.) Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax - Tax Rate Definition Note that the STANDARD rate for the ST-330000000 tax jurisdiction for the STATE tax is set as the Default rate, so that is the rate name that will be used on a tax line unless there is a rule specifying conditions under which a different rate (with its associated percentage for the current time frame) should be used. Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax – Steps of the Tax Determination Process This slide shows the Steps of the Tax Determination process for the STATE tax. Remember that the US-SALES-TAX-101 tax regime has 4 taxes, so these steps would have to be executed for each tax – STATE, COUNTY, CITY, and LOCATION. Each Step in the Tax Determination process has a Default Result and MAY have one or more rules which will be executed in order for that step. However, rules are OPTIONAL and normally are created for EXCEPTION situations. Note that the default result of the Determine Tax Applicability step is Not Applicable, meaning that unless there are rules whose conditions are met for a given transaction, no tax line for the STATE tax will be generated. Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax – Rules on a Step of the Tax Determination Process Note in my environment that there ARE Actually three rules on the Determine Tax Applicability step but none of them are enabled. If they WERE enabled, they would be evaluated in order by the rule order – 10,20, 200. If the conditions of a given rule are met then the tax engine will use the result of that rule. If not, the tax engine will proceed to evaluate the next rule by rule order. Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax – AP invoice with no line for STATE Tax With the configuration shown on the prior slide, NO tax line for STATE tax will be generated because the default result for the Determine Tax Applicability step was Not Applicable. Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax – AP invoice with no line for STATE Tax So, there is NO tax line for the STATE tax, because the result of the Determine Tax applicability step for the STATE tax in the US-SALES-TAX-101 tax regime attached to the Vision Operations operating unit was Not Applicable. Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax – Tax Determining Factor Set In order to create a rule to specify conditions under which the STATE tax would be applicable, we must first create a Determining Factor Set, which is a set of Determining Factors that the tax engine can evaluate. Determining factors can be things like one or more segments of the charge account, a fiscal classification to which the product on a transaction belongs, a fiscal classification to which the supplier on an AP invoice belongs, etc.. A Determining Factor set can consist of MULTIPLE determining factors – you could look at a combination of the Fiscal classification to which the product belongs and the fiscal classification to which the supplier belongs. However, in our example, the only determining factor is segment 3 of the charge account on the AP invoice distribution. In our chart of accounts, segment3 is the natural account segment. Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax – Tax Condition Set A condition set is the actual conditions that will be evaluated in the rule. So the condition set is what the rule is looking FOR, as opposed to the Determining factor set, which is what the rule is looking AT. Our condition set only has one condition which is looking to see if segment 3 of the charge account is 7740 – we could have looked for a range of values like 7000-7999, or we could have looked at a combination of conditions. Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax – Tax Rule on the Determine Tax Applicability Step We create our rule on the Determine Tax applicability Step of the Tax Determination Process for the STATE tax. We can specify that the rule uses our determining factor set which looks at segment 3 of the charge account on the AP invoice line distribution. Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax – Tax Rule on the Determine Tax Applicability Step In the rule conditions, we can specify that if a transaction meets the conditions of the rule (where segment3 of the AP line distribution charge account is 7740) then the rule will return a result that tax is Applicable (as opposed to the default result of the Determine Tax Applicability step which would be that tax is Not Applicable.) Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax – Tax Rule on the Determine Tax Applicability Step We specify the order in which the rules should be evaluated. We can change the order of the rules to evaluate for a given step if necessary. In my example the rule order really does not matter because all of the rules except for rule order 5 are not enabled anyhow. Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax – Tax Rule on the Determine Tax Applicability Step This screenshot shows the Determine Tax Applicability Step of the Tax Determination process, and shows the 4 rules, only one of which is enabled, and will be evaluated first because its rule order is 5. Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax – AP invoice with a line for STATE Tax because of rule Now if I go back to AP, and I enter another invoice and click the Calculate tax button, a line IS generated for the STATE tax belonging to the US-SALES-TAX-101 tax regime which is attached to the Vision Operations operating unit, specifically because of the rule that we created that specified conditions under which tax is APPLICABLE, rather than the default which is that the STATE tax is Not applicable. Oracle E-business tax – How to create a rule to make tax calculate differently

E-business Tax – AP invoice with a line for STATE Tax because of rule A quick reiteration of what the tax engine does: Determines the tax regime by looking to see what tax regimes are associated with the operating unit in which the tax was created Looks at the tax regime to determine the list of candidate taxes which COULD Apply. For each of the candidate taxes, the tax engine will execute the steps of the tax determination process: Determine tax applicability Determine place of supply to determine which address to use to derive the jurisdiction field on the tax line. Determine Tax status – use the default unless there are rules whose conditions are met. Determine tax rate – use the default unless there are rules whose conditions are met. Determine taxable basis – STANDARD_TB means use the line amount. Determine tax calculation – STANDARD_TC means take the line amount and multiply by the percentage associated with the rate. Oracle E-business tax – How to create a rule to make tax calculate differently

Some additional resources Oracle Ebusiness Tax documentation (user guide, admin guide, implementation guide Oracle University’s E-business tax class There are LOTS of additional resources available about Ebtax – Oracle Unviersity has a 3 day ebtax class where we set up both US non-recoverable tax and VAT recoverable tax examples, and we create a variety of rules on the different steps of the Tax Determination process to make tax calculate differently under a variety of circumstances like customers or vendors belonging to a particular category, or items belonging to a particular category etc. That class will soon also be available as Training on Demand as well. Oracle E-business tax – How to create a rule to make tax calculate differently

Summary In this presentation you learned about: Basic EBTax setup – Regime, Tax, Status, Rate, Jurisdiction, Defaults for the steps of the Tax Determination process Creating a rule to make tax not applicable if the account segment of the charge account meets specific criteria -Creating a Determining Factor Set -Creating a Condition Set -Creating a rule on the Determine Tax Applicability Step -Testing the Rule to assure that no tax line is generated. Oracle E-business tax – How to create a rule to make tax calculate differently