EB Tax

E-Business Tax
Following steps to be followed in order to establish tax in E-Business Tax.
1. TAX REGIMES
it mean tax region
Click on Create
Tax Regime Code: Tax Regimes 001

Name: Tax Regimes 001
Regime Level: Country
Country Name: United States/Pakistan
Select effective date: 01/01/2019
hit Show Control and defaults--- expand this
Uncheck - Allow tax recovery

Check - Allow tax exemption
Check - Allow tax exception
Tax currency - PKR
Check - Allow multiple jurisdictions
Click on continue
Party Name: LCPK/LeBLANC Communication - Legal Entity

Configuration for taxes and rules: Common Configuration with party overrides
Configuration for product exceptions: Common Configuration
Effective Date: 01/01/2019
Click on finish - Tax Regimes is completed
2. TAXES
This should be STATE, COUNTY, and CITY level
Click on Create
Tax Regime Code: Tax Regime 001

Configuration Owner: Global Configuration Owner
Tax Source: Leave as default
Tax: STATE
Tax Name: STATE
Tax Type: Leave Blank
Geography Type: STATE
Parent Geography Type: Country
Parent Geography Name: United States/Pakistan
Click on Create another; this will automatically save STATE level Taxes

Tax: COUNTY
Tax Name: COUNTY
Geography Type: COUNTY
Parent Geography Name: United States
Click on Create another

Tax: CITY
Tax Name: CITY
Geography Type: CITY
Parent Geography Name: United States
Click on apply - The Tax has been successfully completed
3. TAX STATUS
Click on Create

Tax: STATE
Tax Status Code: STANDARD
NAME: STANDARD/GENERAL SALES TAX
Effective From: 01/01/2019
Check enable (Set as Default Tax Status)

Default Status Effective From: 01/01/2019

Tax: COUNTY
NAME: STANDARD

Tax: CITY
NAME: STANDARD
Now Click on apply
4. TAX JURISDICTION
Click on create
Tax Jurisdiction Code: STATE Jurisdiction
Tax Jurisdiction Name: STATE Jurisdiction
Tax: STATE
Geography Type: STATE
Parent Geography Type: COUNTRY (system will automatically fetch)
Parent Geography Name: United States/Pakistan (system will automatically fetch)
Default Tax Jurisdiction Status: enable check box (Set as default tax jurisdiction)
Default Effective From: 01/01/2019
Geography Name: California (CA)/Pakistan
Now click on apply - STATE jurisdiction created
Click on Create
Tax Jurisdiction Code: COUNTY Jurisdiction

Tax Jurisdiction Name: COUNTY Jurisdiction
Tax: COUNTY
Geography Type: COUNTY
Parent Geography Name: United States (system will automatically fetch)
Geography Name: Santa Clara
Now click on apply - COUNTY jurisdiction created
Click on Create
Tax Jurisdiction Code: CITY Jurisdiction

Tax Jurisdiction Name: CITY Jurisdiction
Tax: CITY
Geography Type: CITY
Parent Geography Name: United States (system will automatically fetch)
Geography Name: San Joze

Now click on apply - CITY jurisdiction created
5. TAX RATES
Click on Create

Tax: STATE
Tax Jurisdiction Code: STATE Jurisdiction
Tax Rate Code: STATE Tax / General Sales Tax
Percentage: 8.25% - 15%
Now click on Rate details
A new page will open go to bottom other details and enable check box {Set as default rate} and give
default effective from 01/01/2019 click on apply, it will take back to the same previous page
CREATE ANOTHER FROM THE MAIN TAX RATE TAB

Tax: COUNTY
Tax Jurisdiction Code: COUNTY Jurisdiction
Tax Rate Code: COUNTY Tax
Percentage: 0%

default effective from 01/01/2019 click on apply, it will take back to the same previous page

Tax: CITY
Tax Jurisdiction Code: CITY Jurisdiction
Tax Rate Code: CITY Tax
Percentage: 0.5%
default effective from 18/11/2018 click on apply,
APPLY AGAIN.
6. TAX RULES
Configuration Owner: Global Configuration owner

Tax: STATE
Rule Type: Leave blank
Hit Go button
Change
Determine Tax applicability from "Not Applicable" to Applicable by updating from default Rule Type
Default {Applicable} click on apply Determine place of supply, hit update Rule Type Default search from
list and select ship to, use bill to if ship to is not found Click on apply
Determine Tax registration, hit update
Rule Type Default Search from list "Bill from Party" and click apply
Determine Tax basis, hit update, Rule type default search {Standard TB} Select and hit apply
Calculate Tax Amounts hit update
Rule Type Default search from list {Standard TC} select and hit apply
Repeat the same process for Tax: County

Tax: COUNTY
Hit Go button
Change
Determine Tax applicability from "Not Applicable" to Applicable
by updating from default
Rule Type Default {Applicable} click on apply
Determine place of supply, hit update
Rule Type Default search from list and select ship to, use bill to if ship to is not found
Click on apply
Repeat the same process for Tax: CITY

Tax: CITY
Hit Go button
Change
Determine Tax applicability from "Not Applicable" to Applicable

by updating from default
Rule Type Default {Applicable} click on apply
Determine place of supply, hit update
Rule Type Default search from list and select ship to, use bill to if ship to is not found
Click on apply
Now comeback to the Tax Tab

Regime Level: Country
Country Name: United States
Hit Go
in the bottom we can see STATE - COUNTY - CITY Tax but these are un abled, we need to update to bring
them enable, when we click on update it will take to the page where we need to check the box
{Make Tax Available for Transaction} one by one for all level mean STATE/COUNTY/CITY
hit apply, ignore the message and just save this. All the three tax will be enabled.
now Tax is ready
if we have predefined taxes in the state, county, city we need to disable them, to do this
go to tax manager, tax configuration, select county as United States and tax regime which is
default available , just give the end date and save, message will appear tax regime have been
successfully updated.
Re-generate transaction and calculate tax.

BASIC TAX SETUPS IN E-BUSINESS TAX
These are the basic mandatory tax setups to be performed in the E-Business Tax Module in
R12 to enter Tax lines manually or calculate taxes for any transaction.
1. TAX REGIME: Tax Regime is setup for the taxes in each country and a geographic
region where you do business and where a separate tax applies. A tax regime associates a
common set of default information, regulations, fiscal classifications and registrations to one
or more taxes with same tax requirement.
2. TAXES: Tax is classification of a charge imposed by a Government through a fiscal or
a tax authority. Each separate tax in a tax regime includes records for statuses, tax rates
and rules used to calculate and report tax requirements
3. TAX STATUS: Tax Status is the taxable nature of a product or service in the context of
a transaction for a tax.
4. TAX JURISDICTION: A geographic area where a tax is levied by a specific tax
authority.
5. TAX RATE: The rate specified for a Tax status in effect for a period of time; the tax
rate can be expressed as a percentage or as a value per unit quantity
6. TAX RULES: E-business tax uses the tax setups along with the tax rules to decide
which taxes apply to a transaction and how to calculate the tax amount for each tax that
applies to a transaction.
Case Study – 1
Business Requirement: Calculation of USE TAX in AP Invoices based on Ship To
Location Zip code and Balancing Segment of Chart of Accounts.
The requirement of client was as follows:
Use tax was calculated in an AP Invoice based on the combination of the balancing
segment in the chart of accounts and the zip code of a ship to location.
In 11i different sales tax codes were setup for each combination of balancing segment and
ship to location. An offset tax code was attached to each of the sales tax code.
For an invoice where use tax was applicable the user would enter the sales tax code (which
has been attached to an offset tax code) and validate the invoice. This would generate two
tax lines one each for sales tax and offset tax.
After the upgrade to Oracle R12; Use tax can be applied on an invoice in two ways:
1. Similar to 11i make sales tax and offset tax codes to generate the use tax lines in the
AP invoice.
1. Use feature of Self Assessed tax (newly introduced in R12) for accounting of use tax
lines. Concept of Self Assessed tax is explained later in the document.
In this case study we have used option 2 as the base.

Detailed setups performed
1. DEFINE TAX REGIME
Responsibility & Navigation:
Tax Managers – Tax Configuration – Tax Regime – Create
Define one tax regime for country United States as shown below:
2. DEFINE TAXES
Define one tax called US USE TAX under the tax regime created for United States
Tax Managers – Tax Configuration – Taxes – Create
Click on Apply to save the changes
3. DEFINE TAX STATUSES
Define one tax status for the tax regime and tax setup in the previous steps.
Tax Managers – Tax Configuration – Tax Statuses – Create
4. DEFINE TAX JURISDICTIONS

Define one tax jurisdiction for the tax regime and tax setup in the previous steps.
Tax Managers – Tax Configuration – Tax Jurisdictions – Create
5. DEFINE TAX RATES

Define multiple rates for the combination of Corp and Ship to location zip codes. A tax rate
is made for the combination of Tax Regime, Tax and Tax Status.
For instance:
Balancing Segments BAL_A and BAL_B
Ship to Location zipcode 100 and 101
The different rates which can be setup are
USE_BAL_1_100 – 5%
USE_BAL_B_101 – 10%
USE_BAL_A_101 – 2%
USE_BAL_B_100 – 1%
Tax Managers – Tax Configuration – Tax Rates – Create
Click on Tax Accounts to enter the Expense and liability account details
Enter the Tax Expense Account. If this is left blank the expense account for ITEM line will
be used.
The Tax Recoverable/Liability is the Use tax Liability Account to be used.
6. DEFINE TAX RULES
Oracle provides a seeded set of Tax Rules which can be used by the user for tax
calculation. For any transaction made the tax determination process uses these tax rules to
decide the taxes which will apply and the amount of tax which has to be applied for a
transaction.
Prerequisites for setting up the Tax Rules:
Step1:
To decide whether use tax applied on any transaction within Payables module a tax
classification code called USE TAX APPLICABLE will be made. A tax classification code is
similar to a tax rate code with a tax rate of 0%.
Step2:
Create Geography Hierarchy:
The various zipcodes which will be used in the tax rules have to be setup in the geography
hierarchy in the trading community architecture.
Trading Community Manager à Administration à Geography Hierarchy
Query for country United States in the below screenshot
Click on View Details tab
Chose the State required and click on View Details

Enter the various County details or enter a default county for the state as shown below.
Click on View Details
Enter the different cities for the county and click on View Details to enter the zip code for
each city.
Enter the zip codes which will be used for tax calculation with the code type as “Tax
Geography Code”. Click on Apply after creating/updating any changes
Step3: Create Tax Determining Factor Sets
Tax Managers – Advanced Setup Options – Tax Determining Factor Sets – Create
The determining factor will work in the following manner:

Since use tax had to be calculated on invoices based on the balancing segment and ship to
location we chose the following values in a determining factor set:
1. Flexfield segment1 of the Line account is the balancing segment

2. The ship to location postal code of the invoice
3. Since use tax will apply only to certain invoices we chose a transaction input factor
and the value is called as tax classification code.
Step4: Create Tax Condition Sets

Tax Managers – Advanced Setup Options – Tax Condition Sets – Create
The tax condition set is made from the tax determining factor set. In the above screenshot
we have made a tax condition set for balancing segment CIP and postal code 62201 using
the determining factor set made in the above set.
TAX RULE SETUP
Tax Managers – Tax Configuration – Tax Rules
The following tax rules will be setup for use tax calculation:
1. Determine Tax Applicability: Since the tax US_USE applies only for use tax we make
this tax applicable only if the tax classification code in the invoice for an ITEM line is
“USE TAX APPLICABLE”

2. Determine Tax Rate – This rule will derive the use tax rate for the invoices using the
determining factor set and condition set. While making the tax rule we enter the
determining factor set and the condition set made in the previous steps as shown in
below screenshot.
For each condition set there will be a different tax rate which will be applied.
Example:
As shown in above screenshot there are 4 condition sets:
1. COND_CIP_62201 – This means that the balancing segment is CIP and ship to
postal code is 62201. If the invoice satisfies these two conditions and the tax
classification code is USE TAX APPLICABLE the tax rate used will be
USE_CIP_62201.
1. COND_AMC_63103 – This means that the balancing segment is AMC and ship to
postal code is 63103. If the invoice satisfies these two conditions and the tax
classification code is USE TAX APPLICABLE the tax rate used will be
USE_AMC_63103.
For all the other rules the default values have been used.
7. CONCEPT OF SELF ASSESSED TAX
A self-assessed tax is a tax calculated and remitted for a transaction, where tax was not
levied by the supplier but is deemed as due (and therefore needs to be paid by the
purchaser).
In such cases the purchaser is responsible for calculating and remitting the tax. Self-
assessment is also known as reverse charge or use tax in certain tax regimes.
When self-assessment applies to a tax line, E-Business Tax creates the recoverable and/or
non-recoverable distributions, and Payables creates an additional accounting distribution to
record the liability for the self-assessment.
You can set the self-assessment option:
• At the tax profile level to default to the tax registrations that you create for this party.
• At the tax registration level.
• On an individual tax line.
E-Business Tax applies self-assessment to Payables invoices received by the first party
according to the tax registration setting of the Set for Self Assessment/Reverse Charge
option. The specific tax registration record that E-Business Tax uses is derived either from
Determine Tax Registration rules or from the default tax registration.
We have setup the self assessed tax feature at the Tax Registration level.
Navigation: Tax Managers – Home – External Dependencies – Create First Party : Legal
Entity and Establishments
Query the Legal Entity -View Details – Establishments Tab – Query Establishment (which is
the OU here) – Registrations – Create Tax Registration
Since we are using the self assessed tax feature only for use tax invoices we set up this
option for the tax US_USE only. Other taxes will not have this flag checked.
8. INVOICE CREATION AND USE TAX CALCULATION

Invoice can be created in base table or interface table with the tax classification code as
USE TAX APPLICABLE. Use the correct ship to location and balancing segments in the
invoice.
The tax rules will be triggered on validation of the invoice in base tables and the use tax line
will be generated.
Since we are using the self assessed tax feature there will not be any tax displayed on the
invoice line, the tax details will be visible in the Tax Details form. They will also not be
stored in ap_invoice_lines_all table; instead they will be stored in zx_lines table with the
trx_id which will be the invoice_id of the invoice.
Tax lines form indicating the use tax details.
Case Study – 2
Business Requirement: Calculation of SALES TAX in AP for Invoices made from source
ERS based on Supplier site pin code
The requirement of client was as follows:
There were many invoices created in AP using the ERS source i.e create the PO and
Receipt in Purchasing module and then run the “Pay on Receipt” program to generate the
invoice in interface tables with source as ERS.
The standard Payables Open Interface Import program will then import these invoices into
base oracle.
Sales tax applies on some of these ERS transactions based on the zip code of supplier site.
For instance: An ERS invoice with a supplier site A having zip code 63301 has a tax rate of
10% to be applied where as supplier site B having zip code 62284 has a tax rate of 6% to
be applied.
Since the ERS invoice which is inserted into the interface table consists of only ITEM line
we needed to insert one more TAX line with the correct amount. Additionally the total
invoice amount also has to be corrected to include the tax amount.
Detailed setups performed for the same.
1. DEFINE TAX REGIME
Tax Managers – Tax Configuration – Tax Regime – Create
Define one tax regime for country United States as shown below:
2. DEFINE TAXES

Define one tax called US SALES TAX under the tax regime created for United States
Tax Managers – Tax Configuration – Taxes – Create
Click on Apply to save the changes
3. DEFINE TAX STATUSES
Define one tax status for the tax regime and tax setup in the previous steps.
Tax Managers à Tax Configuration à Tax Statuses à Create
4. DEFINE TAX JURISDICTIONS

Define one default tax jurisdiction for the tax regime and tax setup in the previous steps.
Tax Managers – Tax Configuration – Tax Jurisdictions – Create
5. DEFINE TAX RATES

Define tax rates for each supplier site zip code. A tax rate is made for the combination of
Tax Regime, Tax and Tax Status.
For instance:
Supplier site zip codes are 63119 and 61548.
The different rates which will be setup are
SALES_63119 – 7.575%
SALES_61548 – 7.25%
Click on Tax Accounts to enter the Expense and liability account details
Enter the Tax Expense Account. If this is left blank the expense account for ITEM line will
be used.
The Tax Recoverable/Liability is the Use tax Liability Account to be used. Since this is a
sales tax rate we enter the default account of 000 for the same.
6. DEFINE TAX RULES
Oracle provides a seeded set of Tax Rules which can be used by the user for tax
calculation. For any transaction made the tax determination process uses these tax rules to
decide the taxes which will apply and the amount of tax which has to be applied for a
transaction.
Prerequisites for setting up the Tax Rules:
Step1:
To decide whether use tax applied on any transaction within Payables module a tax
classification code called SALES TAX APPLICABLE will be made. A tax classification code
is similar to a tax rate code with a tax rate of 0%.
Step2: Create Geography Hierarchy:

The various zipcodes which will be used in the tax rules have to be setup in the geography
hierarchy in the trading community architecture. Set up the zip codes to be used for the
supplier sites where sales tax needs to be calculated based on the step 2 in Point 6 in Case
study 1.
Step3: Create Tax Determining Factor Sets
Tax Managers – Advanced Setup Options – Tax Determining Factor Sets – Create
The determining factor will work in the following manner:

Since sales tax had to be calculated on invoices based on the supplier site for ERS invoices
the determining factors would be:
1. Geography – Ship From postal code

2. Transaction Input Factor – Tax classification code which will be used for ERS
invoices.
Step4: Create Tax Condition Sets

Tax Managers – Advanced Setup Options – Tax Condition Sets – Create
The tax condition set is made from the tax determining factor set. In the above screenshot
we have made a tax condition set for postal code 61548 and tax classification code SALES
TAX APPLICABLE using the determining factor set made in the above set.
TAX RULE SETUP
Tax Managers – Tax Configuration – Tax Rules
The following tax rules will be setup for use tax calculation:
3. Determine Tax Applicability: Since the tax US_SALES applies only for ERS Sales
Tax we make this tax applicable only if the tax classification code in the invoice for an
ITEM line is “SALES TAX APPLICABLE”

4. Determine Tax Rate – This rule will derive the sales tax rate for the invoices using the
determining factor set and condition set. While making the tax rule we enter the determining
factor set and the condition set made in the previous steps as shown in below screenshot.
For each condition set there will be a different tax rate which will be applied.
Example:
As shown in above screenshot there are 4 condition sets:
1. COND_SALES_63119 – This means that if the ship from postal code is 63119 and
the tax classification code in the invoice is SALES TAX APPLICABLE then the tax rate
used will be SALES_63119.
1. COND_SALES_61548 – This means that if the ship from postal code is 61548 and
the tax classification code in the invoice is SALES TAX APPLICABLE then the tax rate
used will be SALES_61548.
For all the other rules the default values have been used.
7. INVOICE CREATION AND SALES TAX CALCULATION FOR ERS INVOICE.
Generate the ERS invoice in the invoice interface tables using the program Pay on Receipt
program.
Update the following values for the ERS invoice in the interface table:
TAX CLASSIFICATION CODE – SALES TAX APPLICABLE
CALCULATE TAX AMOUNT DURING IMPORT – Set the flag to Y
ADD TAX TO INVOICE AMOUNT – Set the flag to Y
The calculate tax amount flag and add tax to invoice amount is set to Y so that the Payables
Open Interface Import program would trigger tax rules and calculate the tax amount and
also add the tax amount to the invoice amount. Hence the invoice will be imported with the
tax line and correct invoice amount.
Following is the update script for the same:
UPDATE apps.ap_invoices_interface
SET add_tax_to_inv_amt_flag = ‘Y’
AND calc_tax_during_import_flag = ‘Y’
WHERE source = ‘ERS’
UPDATE apps.ap_invoice_lines_interface
SET tax_classification_code = ‘SALES TAX APPLICABLE’
WHERE invoice_id IN (SELECT invoice_id
FROM apps.ap_invoices_interface
WHERE SOURCE = ‘ERS’)
Snapshots of ERS invoices in the interface table.
Invoice header in the interface table before it was processed.
Invoice line in the interface table
Supplier site pincode – 62223
After importing this invoice; the tax line has got generated based on the tax rule for Supplier
site. The invoice amount has also changed from 1000 to 1073.50

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E-Business Tax

Following steps to be followed in order to establish tax in E-Business Tax.

Tax Regime Code: Tax Regimes 001

hit Show Control and defaults--- expand this

Uncheck - Allow tax recovery

Party Name: LCPK/LeBLANC Communication - Legal Entity

Click on finish - Tax Regimes is completed

This should be STATE, COUNTY, and CITY level

Tax Regime Code: Tax Regime 001

Tax Regime Code: Tax Regime 001

Click on Create another

Tax Regime Code: Tax Regime 001

Click on apply - The Tax has been successfully completed

Tax Regime Code: Tax Regime 001

Check enable (Set as Default Tax Status)

Click on Create another

Tax Regime Code: Tax Regime 001

Click on Create another

Tax Regime Code: Tax Regime 001

Now Click on apply

Now click on apply - STATE jurisdiction created

Tax Jurisdiction Code: COUNTY Jurisdiction

Tax Jurisdiction Code: CITY Jurisdiction

Now click on apply - COUNTY jurisdiction created

Tax Regime Code: Tax Regime 001

Now click on Rate details

CREATE ANOTHER FROM THE MAIN TAX RATE TAB

Tax Regime Code: Tax Regime 001

Now click on Rate details

Tax Regime Code: Tax Regime 001

Configuration Owner: Global Configuration owner

Repeat the same process for Tax: County

Configuration Owner: Global Configuration owner

Repeat the same process for Tax: CITY

Configuration Owner: Global Configuration owner

Determine Tax applicability from "Not Applicable" to Applicable

Now comeback to the Tax Tab

Re-generate transaction and calculate tax.

In this case study we have used option 2 as the base.

4. DEFINE TAX JURISDICTIONS

5. DEFINE TAX RATES

Click on View Details tab

Chose the State required and click on View Details

The determining factor will work in the following manner:

1. Flexfield segment1 of the Line account is the balancing segment

Step4: Create Tax Condition Sets

8. INVOICE CREATION AND USE TAX CALCULATION

2. DEFINE TAXES

4. DEFINE TAX JURISDICTIONS

5. DEFINE TAX RATES

Step2: Create Geography Hierarchy:

The determining factor will work in the following manner:

1. Geography – Ship From postal code

Step4: Create Tax Condition Sets

Invoice line in the interface table

Supplier site pincode – 62223

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