How to Setup Taxes in R12 - High Level Overview

Step 1: Create the Tax Regime

The tax regime is the highest/ultimate level that taxes are rolled up to, typically, a specific country. In this step, the Controls and Defaults must be set. The Control section outlines 4 options. Once the tax is made live, the control options cannot be changed.

The Defaults section will default as applicable to the tax, status, jurisidiction, and tax rate levels, but they can be changed at each level.

Step 2: Create the Tax

One Tax Regime can have multiple taxes defined under it. The tax type, e.g. sales, VAT, use, is determined when the tax is set up. Taxes can be set up by geography type, which allows for taxes at different levels.. For example, in the US, there is can be a tax levied at the State level, one at the County level, and one at the City level.

Step 3: Create the Tax Status

This is used primarily in the UK to define reduced rate, zero rate, etc. taxes. All taxes must have at least one tax status defined, and one of those must have the "Set as Default Status" option checked.

Step 4: Create the Tax Jurisdiction

A tax jurisdiction is a geographic area for which a tax is levied, e.g.Colorado, California, Florida, El Paso County, Los Angeles.

There must be at least one Tax Jurisdiction for each Tax Status with the "Set as default Tax Jurisdiction" selected and the "Default Effective Date" supplied.

Step 5: Create the Tax Rate

Create specific tax rates to be applied for a geography. There must be at least one default tax rate. The tax accounts are also set up in this step.

Step 6: Define Tax Rules

Set defaults for the following rule types:

Place of Supply

Registration

Taxable Basis

Calculate Tax Amounts

Step 7: Make the Tax Live for Transactions

Return back to the Tax created in step 2, and select the Make Tax Available for Transactions option. If it is not available to be checked, the tax is not set up correctly. Any missed setups will need to be completed before this can be setup.