SAP Knowledge Base Article - Public

2662532 - Tax Code or Tax Country Is Not Triggered As Expected by the System in Sales order


You are creating a Sales Order and you expected to see a specific Tax Code for the Tax Country US, but the system triggers a different one.


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Reproducing the Issue

We will use the following example:

The Seller Party is from California with the Tax Jurisdiction Code CA and the Ship-From Party has Internal fulfillment and is from New Jersey Tax Jurisdiction Code NJ.

  1. Go to the Sales Orders work center.
  2. Go to the Sales Orders view.
  3. Search for sales order ABC (ABC represents the ID of the sales order created).
  4. Click on the Edit button.
  5. Navigate to the Items tab.
  6. Select the Taxes subtab.

You can see that the system determines CA as Tax Jurisdiction Code but you expected NJ to be determined.


In order to determine the Tax jurisdiction role in a sales order the relevant roles of the business partners involved are:

  • The contract-from (CF) party – in our example of a sales order the legal seller.
  • The contract-to (CT) party – the legal buyer.
  • The ship-from (SF) party – the location the goods are being ship from (Fulfillment which can be internal or external).
  • The ship-to (ST) party – the receiver of the goods which can be the buyer party but also any other party.
  • Specifically for services: the service location (SL) – the place and party where a service is provided.

Taxes on materials deliveries within the United States are levied according to the law of the destination state (Ship-to). Only in California and Texas are the deliveries taxed according to the state of origin (Ship-from). You can add your own combinations in business configuration and decide which combination is origin-based or destination-based for an intrastate transaction, which means that ship-to and ship-from are the same US state. To find the activity:

  1. Go to the Business Configuration work center.
  2. Choose the Implementation Projects view.
  3. Select your implementation project and click Open Activity List.
  4. Select the Fine-tune phase.
  5. Select the Tax on Goods and Services — US activity from the activity list.

Here you can add additional rules for destination-based or origination-based taxation for intrastate transactions. The rules are checked from top to bottom, with the rules having more precise parameters placed higher in the list. The less specific a rule is, the lower the rule should be placed in the list. Empty fields are handled as wildcards. In general the rules are destination-based. If you want an origination-based taxation, you have to set the flag "Origination Taxation".

However, this only applies if the transaction is within tax reporting group (if all parties reporting to the same tax authority) and/or we have nexus in the state. To have nexus in the state, this means that for destination based states you need to have a tax authority for the Ship To State and for origin based states you need to have a tax authority for the ship from state. If both don’t apply then the tax jurisdiction code of the Contract-From party (CF) which is the seller party in the sales document will be used to determine the tax jurisdiction code.


This is the expected system behavior.

If you want to ensure that as in our example NJ will be determined as the Tax Jurisdiction Code you would have to ensure that you have nexus in the state. To have nexus in the state, you need to have a tax authority:

  1. Go to the Tax Management work center.
  2. Go to the Tax Authorities view.
  3. Go to the Tax Authorities sub-view.
  4. Click on New button.
  5. Select the Tax Authority.
  6. Fill up the mandatory fields.

After that, you have now the nexus in the state.

See Also

Knowledge Base Article 1621997 - No taxes calculated for US - Tax Code US 507


Tax Code ; Tax Country ; US ; Tax Jurisdiction Code. , KBA , AP-TTE-TC , Tax Calculation , AP-SLO-SO , Sales Order , How To


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