SAP Knowledge Base Article - Public

3485410 - Display External Tax Document for Tax Exempt Tax Codes

Symptom

Tax code is not relevant for External Tax and therefore no data for fields like Tax State, Tax Sourcing, Tax Jurisdiction Code, Jurisdiction Description in Jurisdiction Level Overview in app Display External Tax Document.

Environment

SAP S/4HANA Cloud 

Cause

Where Tax-Relevant Indicator is set to 2 - Is not relevant to tax, external system is not used, the External system decides transaction is non taxable, it is correct that there are no values for fields Tax State, Tax Sourcing, Tax Jurisdiction Code, Jurisdiction Description in app Display External Tax Document as there is no update in the external tax tables.

Resolution

The System is working as designed.

The Distinction must be made between those tax codes which are exempt and those which are not.

In Configuration Activity Define Tax Codes for Sales and Purchases  ID  101016 

SAP pre-delivers several tax codes

  • I0: A/P Sales Tax, exempt

  • I1: A/P Sales Tax, taxable, distributed to line items

  • O0: A/R Sales Tax, exempt

  • O1: A/R Sales Tax, taxable

  • U1: A/P Use Tax, taxable, self-assessed

Purpose of Tax Codes:

  • I0 – Sales exemption input taxes: used mainly during Purchase Orders, Invoice Verifications and Accounts Payable for (ship-to location and/or material) exempt transactions.
  • I1 – Sales input taxes: used mainly during Purchase Orders, Invoice Verifications and Accounts Payable.

  • O0 – Sales exemption output taxes: used mainly during Sales Orders, Billings and Accounts Receivable for (customer and/or material) exempt transactions.

  • O1 – Sales output taxes: used mainly during Sales Orders, Billings and Accounts Receivable.

  • U1 – Use input taxes: used mainly during Purchase Orders, Invoice Verifications and Accounts Payable.


In Properties of Maintain Tax Code: Tax Rates of configuration Activity Define Tax Codes for Sales and Purchases

Tax-Relevant: 

'Tax Relevant' Indicator (Only for External Tax System)

If you are using an external system, this parameter controls whether the indicator is relevant to tax.

Definitions:

  • Relevant to tax Blank or O - External system decides if transaction is non taxable vs. taxable. External system’s taxability decision engine will be used.

  • 1 - External system assumes transaction is taxable. Therefore, external system’s taxability decision engine will be ignored and tax rates will be based solely on jurisdiction 
    codes.

  • 2 – Call to external tax system will be bypassed during tax calculation. SAP will impose zero rates and zero amounts. 



Important:
Tax codes I0 and O0 have the same settings as its correspondent tax codes I1 and O1. The only difference is the Relevant to tax indicator set up that is part of the tax code properties. The Relevant to tax indicator must be set to 0 or Blank to make the system perform a tax calculation call for external system.  In such cases the system will update the corresponding fields in app Display External Tax Document



See Also

Display External Tax Document

External Sales and Use Tax Calculation

Keywords

F4782, Exempt, SAP_BR_GL_ACCOUNTANT_US, Jurisdiction level overview  , KBA , XX-PART-TIF , Tax Interface (USA) , Problem

Product

SAP S/4HANA Cloud Public Edition all versions ; SAP S/4HANA Cloud all versions