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Tax code determination

1      introduction

This tutorial will explain you defining tax codes such, that the desired tax code gets applied in the transaction automatically. Also in the same tutorial, we will see how SAP applies tax codes if defined at multiple levels.

2      scenario

Let us take an example wherein tax codes should get applied state wise. But in certain scenarios state should be overridden by business partner.

3      Configure tax code for state

  • Administration –> Setup –> Financials –> Tax –> Tax Code Determination

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In our example, we will see how to configure the tax codes for material item. So “Material Item” is selected under “Determination Type

By default, three priority fields viz. Item, Business Partner & State are listed. Their priority can be changed by making use of “Up” and “Down” arrows in the right side.

As per our business scenario under consideration, we want the tax to get applied either State or BP wise.

  • Select third row and click on the “Up” arrow button till “State” comes at top. Hit “Update” button to accept the change.
  • Select first row (State) to configure the tax information and hit “Key Fields Value”

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  • On hitting “Key Fields Value” button you will get another window.

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  • Enter the desired state on the last blank line and hit “Valid Period” button. You will get another window.

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  • Enter validity period and applicable tax code there and hit “Update” and “Ok” button. The information will get updated in the main window. Hit “Update” and “Ok” button in the “Key Fields Values Set Up” window. Hit “Update” and “Ok” button in “Tax Code Determination” window.

4      test applicability of configuration

  • Let us test the applicability of above configuration. The first key thing to do is creating a customer through Business Partner Master. Important thing to follow here is, mentioning the “State” while defining “Ship To” and “Bill To” address.

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In order to test, let us create a sales order through Sales A/R à Sales Order

You will find tax code configured for state “Gujrat” automatically.

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5      Level two definition of tax code

  • Administration –> Setup –> Financials –> Tax –> Tax Code Determination

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In our

  • Select Business Partner option and hit “Key Fields Value”. Enter business partner.

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  • Select the newly entered business partner and hit “Valid Period” button and enter validity period and applicable tax.

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  • Enter validity period and applicable tax code there and hit “Update” and “Ok” button. The information will get updated in the main window. Hit “Update” and “Ok” button in the “Key Fields Values Set Up” window. Hit “Update” and “Ok” button in “Tax Code Determination” window.

             

6      test applicability of configuration

  • Check the customer in “Business Partner Master”.

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  • If you notice, in our scenario, we have two customers belonging to same state i.e. Gujrat. We have configured tax code at two levels. One at “State” and other at “BP” level.
  • Administration –> Setup –> Financials –> Tax –> Tax Code Determination. Change the priority such that BPcomes at top.

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  1. Through Sales A/R à Sales Order, create a sales order for Datsun India. The BP for whom we configured tax code.

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Here we conclude that, SAP has given BP the priority while allotting tax. Despite both the BPS from same state i.e. Gujrat, SAP assigned tax codes as per definition.

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