Tax jurisdiction

Purpose
The purpose of this page is to clarify the functionality of tax jurisdiction in SD.

Overview
In the following sections you will find information about the Customizing in SD and FI, Tax determination in the Sales document and Releasing to accounting.

Customizing in FI and SD
Customizing in FI
SPRO >
Financial Accounting >
Financial Accounting Global settings >
Tax on Sales/Purchases >
Basic settings
Access Sequences
Define Condition Types
Define Procedures
The tax procedures are similar to SD pricing procedures. They contain all tax conditions that could appear in the SD document.
Examples:
TAXUS
TAXUSJ
TAXUSX

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SD SCN
Wiki
https://wiki.scn.sap.com/wiki/display/SD/Tax+jurisdiction 2/13
The Tax jurisdictions are necessary in countries were they are activated. Technically speaking:
The country has a Tax procedure assigned in transaction OBBG (field T005KALSM)
If this Tax procedure has entries in transaction OBCO (table TTXD), then the country is relevant for Tax jurisdiction
It means that sales documents raised in this country should have:
1. Tax jurisdiction conditions in pricing procedure
2. The shipto
party should have tax jurisdiction in master data. In case of export, and the shipto
party has not tax jurisdiction, then a default should be set in transaction OBCL (see KBA 1672122)

Customizing in SD
The pricing procedure must include the trigger condition and the tax conditions. In this sample, in US: trigger condition UTXJ, tax conditions JR1, JR2, JR3, JR4

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Examples:
RVAJCA Standard CA
/With Jur.Code \ _ tax jurisdiction values calculated internally from FTXP
RVAJUS Standard USA
/With Jur.Code /
RVAXUD Standard USA
/with Jur. ext. \ _ tax jurisdiction values calculated by external tax system (Vertex, Sabrix, Taxware, etc.)
RVAXUS Standard USA
/with Jur. ext. /

Trigger condition
Trigger condition is defined in V/06.
The purpose of trigger condition is only to set the tax code. The tax value will be build by conditions JR1, JR2, JR3, JR4.
UTXJ is the trigger condition used in US. It is calculated on item level. In external calculation (from external tax system) it has value formula 300 assigned the pricing procedure.
It is triggered in function
Pricing.

7/25/2016 Tax jurisdiction ERP

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Wiki
https://wiki.scn.sap.com/wiki/display/SD/Tax+jurisdiction 4/13
Trigger conditions UTXD and UTXE are used in external tax calculation. Both conditions must be used together in the pricing procedure (for technical reasons). Condition UTXD
has value formula 500 and
condition UTXE has value formula 501. They are triggered only by FM PRICING_COMPLETE. The RFC is called only once per document. This is called the MaxTax procedure
(developed by FI), and it is
supposed to be faster.

Tax jurisdiction conditions

Tax jurisdiction conditions JR1, JR2, JR3, JR4 must be defined both in SD and in FI.
In SD the condition JR1 does not have access sequence. The amounts of conditions come from FI.

Determination of the amounts in a sales document

1. Tax jurisdiction code is copied from the shipto
party or from OBCL
2. Tax jurisdiction conditions are included in xkomv in form XKOMV_AUFBAUEN_STEUERN
3. The system determines the tax jurisdiction amounts
from FTXP (in case of internal calculation)
from value formula 300 or 500 (in case of external calculation)

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https://wiki.scn.sap.com/wiki/display/SD/Tax+jurisdiction 5/13
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https://wiki.scn.sap.com/wiki/display/SD/Tax+jurisdiction 6/13

Relevant source code in Pricing

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Wiki
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Note that after XKOMV_AUFBAUEN_STEUERN (LV61AA57), the base value and condition value are not determined yet.
The amount, base value and condition value are determined in XKOMV_BEWERTEN.

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Inside XKOMV_BEWERTEN, the system determines the tax jurisdiction amounts
from FTXP (in case of internal calculation)
from value formula 300 or 500 (in case of external calculation)

Internal calculation
External Calculation
Formula 300 (FV64A300) is executed at item level.
Formula 500 (FV64A500) is executed at header level (Header >
Conditions) in the MaxTax procedure.
The RFC is only triggered by value formula 300 or 500. The value formulas 301, 302, etc. only retrieve values from the results determined by formulas 300 and 500.
Obs.: For external tax calculation it is recommended that the rate is maintained as 100% in FTXP.
Debug:

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1. Check what is the value formula assigned to the relevant tax jurisdiction condition. For example, tax jurisdiction condition XR1 is assigned to value formula 301 (FV64A301) in
the pricing procedure.
2. Set a breakpoint in the statement call function 'GET_TAX_RESULTS_FOR_301_306
3. Create the SD document or update the pricing with pricing type G (which redetermines the tax conditions), for example.
4. Check the call stack. The values returned by GET_TAX_RESULTS_FOR_301_306 are only effective when the value formula (FV64A301 in this example) is called by form
XKOMV_KWERT_ERMITTELN.
Another way to debug:
1. SE24
2. Class CL_XTAX_RULES_RFC, Method RFC_CALCULATE_TAXES_DOC
3. Set a Breakpoint at call function 'RFC_CALCULATE_TAXES_DOC'
If condition control (technical field KSTEU) is F or H, the external tax system is NOT called.
Note 1043372 changes KSTEU in the base formula so that the external tax system could be called.

Releasing to Accounting
7/25/2016 Tax jurisdiction ERP
SD SCN
Wiki
https://wiki.scn.sap.com/wiki/display/SD/Tax+jurisdiction 10/13

Closer look at error message FF805

Set a watchpoint where the error message is issued and check structures BSEG and BSET.
In FI, BSEG contains line items and BSET contains the tax lines. If this structure does not contain a tax line, it is either because the condition has base value zero or is
completely missing in SD.
There is a note (1255945) about how to create pure tax documents but it is very, very rare. This note clears xauto in SD and forward to FI. If xauto is cleared, the FI checks are
not performed.
We could also check XACCIT when AC_DOCUMENT_CREATE is called.
Relevant fields:
TAXIT if it is a tax line.
TXJCD (different per level), TXJDP (the generic), TXJLV (the level)
XACCCRFWBAS
contains the base value.
Obs. 1: the trigger condition is never added to XACCIT
Obs. 2: the account determination for tax conditions is performed in FI
Example of XACCIT passed to FI with Tax jurisdiction:

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Export cases with Tax Jurisdiction

The standard system behavior regarding the tax jurisdiction code for export cases has been changed with the following notes:
1628962 Export
with invalid tax jurisdiction
1768395 Export
with invalid tax jurisdiction (1)
1809374 Export
with invalid tax jurisdiction (2)
1899214 Export
with invalid tax jurisdiction (3)
2016058 Export
with invalid tax jurisdiction (4)
2095331 Export
with invalid tax jurisdiction (5)
After all these notes are implemented (via SNOTE or delivered in Support Package), the default tax jurisdiction code from OBCL is used in all export cases (instead of the shipto
party tax jurisdiction code)
as a result of the corrections.
This data is transfered to the interface for the external tax system. Within this interface it is decided that for this default tax jurisdiction code, no call to the external tax system is
needed as this business
would always lead to a zero percentage rate.
In case another behavior is preferred (to not use this default tax jurisdiction code for these export processes) then you could use program MV45AFZZ for the order process and
program RV60AFZZ for the

invoice process (FORM USEREXIT_PRICING_PREPARE_TKOMK.) Here you could overwrite the TKOMKTXJCD
with KUWEVTXJCD
(the one from the shipto
partner) for exports. Consulting Note
2016990 has an example of this modification for export cases between US and Canada. Consider SAP Notes 83020 and 381348 in this regard.

Related Content
Related SAP Notes
SAP Note 392696: R/3 Tax Interface Configuration Guide
SAP Note 1899214: Export with invalid tax jurisdiction (3)
SAP Note 419124: Export billing document with tax jurisdictions

tax jurisdiction ftxp external sabrix taxware vertex export usa canada brazil trigger utxd utxe utxj obcl taxusj taxusx
obbg obco jr1 jr2 jr3 jr4 xr1 xr2 xr3 xr4 xr5 xr6 xkomv_aufbauen_steuern txjcd maxtax get_tax_results_for_301_306
rfc_calculate_taxes_doc ksteu

4 Comments
7/25/2016 Tax jurisdiction ERP
SD SCN
Wiki
https://wiki.scn.sap.com/wiki/display/SD/Tax+jurisdiction 12/13

Chandan Roy Choudhury

Hi Kelly,
We in our project have a requirement from client to replace vertex with internal SAP R/3 configuration as they dont want to continue with vertex because of cost and minimal
business in
US,Canda.
Now while searching the config guide + development required(if any) I could not find a specific guide for
required IMG steps and others to set
up internal tax jurisdiction for SD/MM/FI transactions (without using
external tax software"
Can you confirm me whether your wiki would cover the MM part as well for determination of tax rate using jurisdictions in US and Canada without using vertex OR, its only the
wiki is applicable
for FI+SD setup.
If not is
there any doc for MM part ?
I also have some open points if you can address:
1.For Cost Center PO how to maintain the TAX Rate through condition record ? Initially we were thinking whether we should use material+jurisdiction code ( negative point on
this is cost centre
based PO wont have mat master)combination
or,Vendor + jurisdiction code combination
2.How to identify the TAX Rate as we found and also you concurred that in US the tax rate is varying with different combinations from region to region ( e.f California) how
to handle this
dynamic combination for fetching tax rate.
Also we believe for 'same' juridction code but fo rdifferent postal codes tax rates vary in US ? how do we handle(SETUP)
that in ECC
3.In case of standard SAP PO defaults the plant jurisdiction code instead of vendor master jurisdiction code.We are not sure whether tax derivation should always be based on
vendor
jurisdiction code if
yes, then how defaulting to vendor jur code can be done ?
a.so we are not sure if this always be vendor jurisdiction code and
b.if yes then
how to default this , is there any user exit or, customization known ?
4.As we know in ECC we would have to maintain condition record with rate for 'All' jurisdiction codes that currently present in vertex So
we are thinking is there any way to maintain in bulk /
uplaod than maintaining manually one by one as this would be a tedious task.
5.Should we use 'TAXUSJ' only as tax procedure in ECC for replacement of vertex or, a custom tax procedure would have to be created.
6.in US teh jurisdiction codes are of 10 char but in ECC standard in TAXUSJ its 9 char ? should we use 10 char only by setting up as below:
The main difference between the Tax Jurisdiction Code between the standard and Vertex is for Std US Tax jurisdiction code consists of 9 digits
County Code(2) + State code (3) + ZIP Code (4)
whereas for Vertex there is an extra digit denoting City /Town at the end i.e. 10 digits.
This can be manually overridden by making it 0 .
7.how will the tax rate changes update will happen after golive?
is there a way to automate ?
8.manual maintenance in ECC for
initial and delta ,
in either case is there any upload / autochange
possible ?
Regards,
Chandan Roy Choudhury

atul kumbhani
A very well written article. Great Job!

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Adriano Sommerlatte
Excellent detailed explanation, Kelly Ynoue. Well done.
Question: DYK whether SAP released any enhancement for Customer and material tax classification on intercompany
billing? Note 10560 states no User Exit existed by then...
"customer or material tax classification to be determined with Country of Shipto
instead of Country of Departure...modification in the programs FV45PFAP and FV45PF0M. No user exit exists
here yet."... Note: 10560.
Thank you.

Alexander Lim
Thanks for the useful documentation, this is exactly what people are looking for.
Not the theoretical article, but high value technical article.

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