Z-TAXATION INSTRUCTIONS

INTRODUCTION

Z-Taxation is a premium feature available for Z-Billing. This functionality allows a Zuora Customer to identify charges as
taxable, calculate taxes based on granular “Sold To” Address details and identify specific customers as Tax Exempt.

The configuration of Z-Taxation includes the following steps:

Implementation Step Description Responsibility

Gather Information

Identify Product Taxation Eligibility The product classification such as Zuora Customer
apparel or Internet service

Identify States/Jurisdictions that The States where there is a Nexus or Zuora Customer
require taxation taxation requirement

Collect Tax Rates for these Tax rates are available from State Zuora Customer
States/Jurisdictions websites or via Tax rate services from
Zuora Partners

Configure Z-Billing

Create Tax Code(s) and load associated Configuration of Accounting Codes and Zuora Customer or Zuora Client
Tax Rates in Z-Billing taxation calculation rules Services depending on engagement
model

Creating/maintaining product catalog There can be a one to many Zuora Customer or Zuora Client
in Z-Billing and associating Tax Codes relationship between the Tax Code and Services depending on engagement
the Product SKUs (charges) model

Configure Z-Billing Invoice Template to The template can be configured to Zuora Customer or Zuora Client
display taxes show line item, subtotal or summary Services depending on engagement
level taxes. model

Extract Data

Extract Invoice Details Export for The detailed sales, taxation report with Zuora Customer
detailed reports necessary to file taxes extensive detail for tax reporting.

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GATHER INFORMATION

Taxability rules and guidelines are different for every customer. Z-Billing has the ability to apply tax rates for addresses with
matching for the address being any level from Country, State, County, City, Zip or a string value for Tax Region.

Zuora customers are responsible for gathering the tax rules and rates that must be applied. Typically, answering the
following questions with a tax advisor will provide enough detail to identify tax rates:

1) Where does the company (Zuora Customer) have a Nexus or physical presence? Typically, this jurisdiction is
identified by the State in the US.

2) Are the company’s products taxable in the jurisdictions identified in Step 1?

3) For each jurisdiction, what tax rates must be applied? For instance, some states such as Wisconsin apply various
taxes based in which County the end customer resides in. In other States, a combination of County and City are
required to determine the applicable tax amount.

Based on these answers, the Tax Rate Load CSV file can be populated with a) matching rule (e.g. city, county, zip, etc.) to
find which tax to apply and b) the tax rate that should be applied.

CONFIGURE Z-BILLING

Creating Tax Codes

A Tax Code is used to identify which tax rules and rates to apply to a specific charge. There is a one-to-many relationship
between products and tax codes. For instance, a Tax Code may be “Apparel” and that may map to hundred of product
SKUs for various clothing in various sizes and colors, etc.

For many companies, 1 Tax Code such as “Internet Service” is applicable for all products. Z-Billing has the ability to store
multiple Tax Codes in the system.

Tax Codes can be created in the Manage Tax Codes section in the Admin section. Once a successful Tax Rate file is
imported, the Tax Code will be automatically activated.

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Field Definitions:

Field Type Required How is this used in Z-Billing?

Tax Code Name Alphanumeric Yes This field is used to identify the tax code and is mapped to the
product charge.

Accounting Code Alphanumeric No This accounting code is associated to the taxes in the Invoice
Details Export

Decimal Places Numeric Yes, Default The number of decimal places controls the out of the tax
is 2 calculation. The default is 2.

Rounding Enumerated Yes, Default This rounding rule applies once the tax is calculated and will
is Up round up the last decimal place. For instance if the calculation
=10.555, this will be rounded up to 10.56 if 2 decimal places are
set and Rounding is up.

Description VarChar No This field is available on the Invoice PDF and the Invoice Details
Export.

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Loading Tax Rates

A Tax Rate Load CSV file can be uploaded per Tax Code. Most Z-Billing customers will have a small number of Tax Codes
and this functionality allows greater flexibility to have specialized taxation where one charge can trigger a state or country
specific tax.

Tax Rate Import File

The Tax Rate Import File has two main sections: Matching Fields and Tax Rates.

Matching Process

The matching algorithm will ignore blank values in any of the matching fields. For instance, if zip code in the matching fields
is blank, values in the zip code field of the sold to contact are not used to determine match.

The order of the tax rates is important for matching. Z-Billing will maintain the order and use the tax rates associated with
the first match found in order.

Zuora recommends entering a Country, State entry for each state with taxation as a "catch all" as the last entry searched for
that state. Either through sorting or as the last records

The Z-Tax Engine mapping process will search for a match only and will not try to identify the closest best match. The
Country, State, County, City, Postal Code and Tax Region are matched between the entry in this file and the Sold To Contact
address.

If a match is not found, Z-Billing will write <nomatch> in the Tax Jurisdiction filed on the Invoice Details Export.

The following fields are used to match the fields in the Sold To Contact:

Field Type Required How is this used in Z-Billing?

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Country Alphanumeric Yes Country code using the allowable values from Z-Billing. This field
is matched to the Country field in the Sold To Contact.

State / Province Alphanumeric Yes State or Province code using the allowable values from Z-Billing.
If US or Canada, the State/Province is required. This field is
(if US or matched to the State/Province field in the Sold To Contact.
Canada)

County Alphanumeric No Customer defined field to aid in taxation. This field is matched to
the County field in the Sold To Contact. This County field is
available for Tenants enabled with Z-Taxation.

City Alphanumeric No This field is matched to the City field in the Sold To Contact.

Postal Code Alphanumeric No This field is matched to the Postal Code field in the Sold To
Contact.

Tax Region Alphanumeric No Customer defined field to aid in taxation. This field is matched to
the Tax Region field in the Sold To Contact. This County field is
available for Tenants enabled with Z-Taxation.

Description Alphanumeric No Customer defined field. This field is used for reporting purposes
and is available on the Invoice Template and Invoice Extract file.

Tax Rates

Z-Billing allows up to three independent taxes to apply to a single charge.

Each tax can have a type of "FlatFee" or "Percentage". If Percentage is used, the Tax Rate should be stored as a decimal
value. For instance, 7% should be entered as .07. Percentages are applied to the charge amount. This means that a
negative percentage will be created if the charge is negative. However, FlatFee taxes are applied as positive values
regardless of whether the charge is negative or positive.

The Tax Rates are not compounded, so each tax will independently be applied to the charge. For instance, if a charge is $10
and Tax 1 is .07 and Tax 2 is .01, Tax 1 will be calculated to .70 and Tax 2 will be calculated to .10

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Field Definitions:

Field Type Required How is this used in Z-Billing?

n-Tax Rate Numeric Yes Any value including whole numbers and decimal numbers. For
Percent, the decimal value is acceptable. For Flat Fee, Any value
is acceptable.

n-Tax Rate Type Enumerated Yes FlatFee or Percentage are the only acceptable values.

n-Tax Name Alphanumeric Yes Free form Text, but will be displayed and grouped by name on
the invoice

n-Tax Jurisdiction Alphanumeric No Optional string value to aid with reporting, typically this value is
State, County, City, etc. This field can also be used to segment
GL.

n-Tax Location Alphanumeric No Optional string value to aid with reporting, typically this value is
Code a numeric that identifies the specific city. This field can also be
used to segment GL.

n- Tax Rate Alphanumeric No Optional string value to aid with reporting, this can be the
Description breakdown of the components of the tax that can be parsed
outside of Z-Billing or a GL segment value.

Load Rules:

• Please ensure the Tax Rate Import file is a Windows CSV file

• The load process requires the Tax Rate Type and Tax Name if the Tax Rate field is populated.

• Blank records will be skipped

• If there is an error in the file, the entire file will be rejected.

• Matching fields are not case sensitive

• There are 3 Tax Rates. When a blank tax rate is reached, no further loading of tax rates for that row will be
performed.

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• If Tax Rate 1 is empty and there are values in Tax Rate 2, Tax Rate 2 will not be loaded.

• Zuora recommends that you always start with Tax Rate 1 and add taxes to Tax Rate 2 and then Tax Rate 3 as required.

The status of the load process will be displayed on the screen. This process will periodically write status to the screen
when loading large files.

If any error is encountered, the entire file will not be loaded. The load process has an error buffer so that it will continue
to load the file until the buffer max of 20 is reached or the process reads through the entire file. This will help identify all
errors so that they can be remedied in one step or stop the process when a substantial number of errors are encountered.

Tax Periods:

When the first tax rate is loaded, the effective period is created with a default start date of today with no end date.

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It is possible to edit the periods by selecting the “Edit Periods” option under the More button.

If tax rates change, please select the New Period button to create a new tax period and upload the appropriate tax rates to
be used for that period.

All tax rates for that period must be loaded. Zuora recommends that you export the tax rates from a period, make
appropriate changes and then import all tax rates in the new period.

Zuora also recommends that you do not enter an end date unless you no longer want taxes applied after this date.

ASSOCIATING TAX CODES TO PRODUCT CHARGES

In the Z-Billing product catalog, it is possible to associate charges to a tax code. The Taxable flag must be set in order to
display the Tax Code. The active Tax Codes will be displayed. In order for a Charge to be taxable, it must be associated with
an active Tax Code per the diagram below.

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INVOICE DISPLAY

When taxes are displayed by charge, Z-Billing will summarize all associated taxes to that charge. It is possible to have up to
3 different taxes that are displayed on the invoice per charge, so it is possible that the tax amount associated to the charge
is the summary of these 3 taxes. Please note that Z-Billing also provides a listing of each individual tax that can be displayed
in the Tax Details section of the invoice.

The standard Invoice PDF template includes three possibilities to display taxes. The simplest display is a total taxation field
for the invoice. Z-Billing will also provide a subtotal of all taxes and group them by Tax Rate, Tax Rate Type and Tax Name
as follows:

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Additionally, it is possible to display each tax associated with the invoice:

Please note that taxes cannot be manually edited on a draft invoice.

CUSTOMER TAX EXEMPTION

It is possible for a Customer Account to be Tax Exempt. If Yes is selected for Tax Exempt, a Certificate ID must be entered.
Pending Verification and No are equivalent and will apply taxes for this account.

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Field Definitions:

Field Type Required How is this used in Z-Billing?

Tax Exempt Enumerated Yes Yes, No or Pending Verification

Certificate ID Alphanumeric Yes if Tax Any value provided by the Merchant

Exempt is
Yes

Certificate Type Alphanumeric No Customer provided data. Often is Reseller or similar value to
represent the document type.

Issuing Alphanumeric No Customer provided data. Typically, this is the state or

Jurisdiction government agency.

Description Alphanumeric No Customer provided data.

ADJUSTING TAXES

Taxes may be adjusted on an invoice using standard adjustment functionality where an adjustment is made to an invoice
with the option of identifying an accounting code.

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TROUBLESHOOTING:

Scenario Troubleshooting Steps

Identifying which tax rate 1) The tax rates are available in the Tax Rates Import file. Please identify which taxes
was applied were applied.

2) If there are multiple taxes and it is not possible to identify which tax was applied, it is
possible to enter troubleshooting data in the Tax Rate Description, Location Code
and/or Jurisdiction that is associated to those taxes.

3) When you run billing again, you should be able to identify the specific tax used by
reviewing these fields in the Invoice Details Extract file.

Incorrect Tax Rate is 1) Identify which tax rate was applied.

applied
2) Review matching rules with the Sold To address

3) If the fields in the tax rate identically match the corresponding address filed for the
Sold To Contact, please contact Zuora support.

No taxes were applied 1) Verify the charge was taxable

2) Verify the Tax Code was active and has tax rates associated with the Tax Code

3) Review the Invoice Details Extract file. For the charge, there should be <nomatch> in
the Tax Jurisdiction field if Z-Tax Engine did not match a tax rate.

4) If <nomatch> is found, then the matching process did not match the address to the
Tax Rate.

5) If the charge is taxable with a valid Tax Code and <nomatch> was not found in the
Invoice Details Extract file, please contact Zuora support

How do I know which Tax 1) The order of the Tax Rate Load file will be preserved when importing into Z-Taxation
Rate will be used
2) Please verify the data is loaded in the correct order by comparing the sequential Tax
Order field with the records in the import file.

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3) If the order is different, please contact Zuora support.

Incorrect CSV File Format 1) Excel sometimes does not convert correctly to CSV (comma separated values).
– column is different from
file format 2) Please open the file using WordPad or another editor and verify the commas line up
with the columns in the Tax Rate Upload file.

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