3679874 - "Tax indicator 1 is not defined for use with condition type" error - S/4HANA Cloud Public Edition

There is a requirement to sell different services to the same customer, each associated with a distinct Withholding Tax Code, led to the use of Material Tax Classification within the pricing setup.

When attempting to add more condition types (besides TTX1) in Change Material App (MM02) the error message "Tax indicator 1 is not defined for use with condition type YWH1" is displayed. 

SAP S/4HANA Cloud Public Edition

1. Configure Material Tax Classification in the pricing setup to accommodate different Withholding Tax Codes for services provided to the same customer.
2. Attempt to add additional condition types (besides TTX1) in the Change Material App.
3. Observe the error message: Tax indicator 1 is not defined for use with condition type YWH1.

The Material Tax Classification in SAP S/4HANA Public Cloud is designed exclusively for indirect tax (VAT) determination and does not support additional condition types for other purposes.

1. Maintain relevant Withholding Tax (WHT) codes at the item level in billing, depending on the service material.
2. Explore the use of the Withholding Tax Determination BAdI to dynamically derive the correct WHT code based on material/service.
3. If neither option is feasible, raise this as a new requirement via the SAP Influence Channel for consideration in future releases. Refer to: How to Submit Feature Requests for SAP S/4HANA Cloud Public Edition.

Maintaining Tax Classifications for Materials | SAP Help Portal

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