How To Setup EBTax So Tax Is Calculated On Payables Invoice

How To Setup EBTax So Tax Is Calculated on Payables Invoice
Raju Ch
Step 1: Create Tax Regime

Step 2: Create Tax
Step 3: Create Tax Status
Step 4: Create Jurisdiction
Step 5: Create Rate
Step 6: Enter Tax Accounts
Step 7: Create Tax Rules (Populate values for all defaults)
Step 8: Make Tax Available for Transaction
Step 9: Test the Tax
APPLIES TO:
Oracle E-Business Tax - Version 12.0.1 and later
Oracle Payables - Version 12.0.1 and later
Information in this document applies to any platform.
PURPOSE
This article is to help beginners setup EBtax so that a tax will be calculated on a Payables Invoice.
DETAILS
Pre-Requisite:
Check how the Party/OU has been setup
Tax Manager/Administrator > Parties > Party Tax Profiles
Query for the following:
Party Type: Operating Unit Owning Tax Content
Party Name: Vision Operations (Name of the OU you wish to setup for tax)
Click Go
Click View Tax Profile
Confirm if 'Use Subscription of the Legal Entity' is checked.
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If this is checked, then the OU is set to use the subscription from Legal Entity. The regime is then
subscribed (in a later step) to the First Party Legal Entity rather than the Operating Unit Owning
Tax Content.
This is a one time setup and the value cannot be toggled. So enable this only after you determine
you want to use this setup.
In our case, for Vision Operations OU, this is NOT checked and therefore we need to set our
Tax Regime up against the Operating Unit and NOT the First Party Legal Entity. (Step 1 below)

Step 1: Create Tax Regime
Tax Manager/Administrator > Tax Configuration > Tax Regimes
Click Create to enter a new Tax Regime.
We are going to create a United States regime.
Enter the following:

Field
Value
Tax Regime Code
XXAA US REGIME
Name
XXAA US REGIME
Regime Level
Country
Country Name
United States
Effective From
01-Jan-2014
Parent Regime Code
NULL
Used to Group Regimes
Unchecked
Click on Show Controls and Defaults
Enter settings for Controls and Defaults as follows:

Field
Value
Controls:
Allow Tax Recovery
Unchecked
Allow Override and Entry of Inclusive Tax Lines
Checked
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Allow Tax Exemptions
Checked
Allow Tax Exceptions
Checked
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Defaults:
Tax Currency
USD
Minimum Accountable Unit
0.01
Rounding Rule
Nearest
Tax Precision
Allow Multiple Jurisdictions
Unchecked
Click Continue
Enter the following information:

Field
Value
Party Name
Operating Unit
Party Type
Operating Unit Owning Tax Content *
Configuration for Taxes and Rules
Common Configuration
Configuration for Product Exceptions Common Configuration

Effective From
01-Jan-2014
* If Use Subscription of the Legal Entity was checked in the prereq step then this would have

been entered against the First Party Legal Entity and not the OU
Click on Finish
Ensure you see confirmation message:
Step 2: Create Tax

Tax Manager/Administrator > Tax Configuration > Taxes
Click on Create
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Field
Value
Tax Regime Code
XXAA US REGIME (From LOV Regime defined in Step 1)
Configuration Owner
Global Configuration Owner
Tax Source
Create a New Tax
Tax
XXAA US TAX
Tax Name
XXAA US TAX
Tax Type
VAT
Geography Type
Country
Parent Geography Type
Country
Parent Geography Name
United States
Set as Offset Tax
Unchecked
Set Tax for Reporting Purposes Unchecked

Click on Show Controls and Defaults

Field
Value
Controls:
Allow Tax Inclusion
Unchecked
Allow Override and Entry of Inclusive Tax Lines Checked

Allow Tax Rounding Override
Checked
Allow Override for Calculated Tax Lines
Checked
Use Legal Registration Number
Unchecked
Allow Multiple Jurisdictions

Allow Mass Creation of Jurisdictions
Checked
Defaults:
Checked
Allow Tax Rate Rules
Checked
Click Apply.
View confirmation message:
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Step 3: Create Tax Status

Tax Manager/Administrator > Tax Configuration > Tax Statuses
Click Create

Field
Value
Tax Regime
XXAA US REGIME (From LOV in Step 1)
Tax
XXAA US TAX (From LOV in Step 2)
Tax Status Code
XXAA US STATUS
Name
XXAA US STATUS
Effective From
01-Jan-2014 (Defaults)
Set as Default Tax Status
Checked
Default Status Effective From 01-Jan-2014 *

* Does not default and is not required so remember to enter this.
Click Apply
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View confirmation message:
Step 4: Create Jurisdiction

Tax Manager/Administrator > Tax Configuration > Tax Jurisdiction
Click Create

Field
Value
Tax Jurisdiction Code
XXAA US JURISDICTION
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Tax Jurisdiction Name
XXAA US JURISDICTION
Tax Regime Code
XXAA US REGIME (From LOV Step 1)
Tax
XXAA US TAX (From LOV Step 2)
Geography Type
COUNTRY
Effective From
01-Jan-2014
Geography Name
United States
Default Tax Jurisdiction Settings:

Set as default Tax Jurisdiction
Checked
Default Effective From
01-Jan-2014
Click Apply
Ensure confirmation message is received.
Step 5: Create Rate

Tax Manager/Administrator > Tax Configuration > Tax Rates
Click Create
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Field
Value
Tax Regime Code
XXAA US REGIME (From LOV Step 1)
Configuration Owner Global Configuration Owner

Tax
XXAA US TAX (From LOV Step 2)
Tax Status Code
XXAA US STATUS (From LOV Step 3)
Tax Jurisdiction Code XXAA US JURISDICTION (From LOV Step 4)

Tax Rate Code
XXAA US RATE
Rate Type
Percentage
Rate Periods:
Percentage Rate
20
Effective From
01-Jan-2000
Click on Rate Details button and scroll down
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Field
Value
Set as Default Rate
Checked
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Default Effective Date 01-Jan-2000

Click Apply
Note: This returns you to the Tax Rates page and the rate has not yet been saved, just the details
for it.
Click Apply again.
Ensure confirmation message is received
Step 6: Enter Tax Accounts

Query XXAA US Tax
Click Go
Click Tax Accounts
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Search for Vision Operations OU and click create
Enter the Operating Unit and populate Tax Expense and Tax Recoverable/Liability accounts.
Click Apply.
Note this has not been saved at this point.

Click Apply again
Click Apply a third time
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Step 7: Create Tax Rules (Populate values for all defaults)

Tax Manager/Administrator > Tax Configuration > Tax Rules
Field
Value
Configuration Owner Global Configuration Owner

Tax Regime Code
XXAA US REGIME
Tax
XXAA US TAX
Click Go to search for existing default rule
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Click the pencil icon in the Set Default column to change any of the defaults defined
Update the defaults as follows:
Field
Value
Determine Place of Supply
Ship to, use bill to if ship to is not found
Determine Tax Applicability Applicable

Determine Taxable Basis
STANDARD_TB
Calculate Tax Amounts
STANDARD_TC
Note: Direct Tax Rate Determination is used only for upgraded taxes so this is greyed out. The
last item, Determine Recovery Rate is also not updatable because this tax regime has not been
setup to allow recoverable taxes.
Step 8: Make Tax Available for Transaction


Query Tax
Click on Update Pencil Icon
Check the box 'Make Tax Available for Transactions'

Click Apply
This warning is ok since we know we didnt enter an exchange rate type.
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Click Yes and receive confirmation of changes saved
Step 9: Test the Tax

Payables > Invoices : Entry > Invoices
Enter Invoice for Supplier with a US Ship-To address

Enter Line information
Ensure the SHIP TO location at the line level contains a US location (As that is how we determine
place of supply)
Click distributions
Enter Invoice distribution
Save
Go back to Invoices and click Calculate Tax
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Tax line is created click on Tax Details
You can see that the XX US REGIME has been applied and tax calculated at 20%.
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How To Setup EBTax So Tax Is Calculated On Payables Invoice

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How To Setup EBTax So Tax Is Calculated on Payables Invoice

Step 1: Create Tax Regime

Confirm if 'Use Subscription of the Legal Entity' is checked.