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Oracle EBTax US Sales and Use Tax Setup Examples
United States Sales and Use Tax
United States Sales and Use Tax is a tax levied on the end consumer, with the business serving as the collection agent for the tax authority. Any company receiving goods within a state must either pay sales tax on receipt or self-accrue a use tax, usually to the same value.
The self-accrual scheme ensures that the state receives income independent of the tax registration of the business.
The details of rates and regulations surrounding sales and use tax vary from state to state, and are a matter of state and local law and court cases. Exemptions are normally available in each state, including, but not limited to: resales, manufacturing, research and development, non-profit or exempt organizations, and governmental organizations.
The nexus of taxation refers to the minimum level of commerce necessary to allow a tax authority to impose a tax registration, tax filing, and/or tax collection responsibility. The type of activity required to create nexus is defined by state or local statute, case law, and the due process and Commerce Clause of the United States Constitution. Whether a business has established nexus in a tax jurisdiction requires an assessment of all facts and circumstances of its activity within that jurisdiction. You should seek the advice of a qualified tax professional to determine if your business has established nexus (a registration and filing requirement) before you implement sales tax.
The situs of taxation describes which tax authority levies the tax. This is typically the ship-to state, county, or city, although there are many local taxes that base situs on the ship-from location. Any tax collected for a given tax authority must be reported back to that same authority.
Setup Features
This tax setup example is for a first party registered in California and dealing with city, county, state transactions. Setup features include:
- There are three taxes under the US Sales and Use tax regime, for city, county and state sales.
- US Sales and Use tax is not recoverable, so the setup does not include recovery rates.
- There are multiple tax jurisdictions at the city and county level.
Tax Regime Setup
| Field | Value | Field | Value |
|---|---|---|---|
| Main Information | |||
| Tax Regime Code | US SALES AND USE | Country Name | United States |
| Name | US Sales and Use | Effective From | 1-Jan-2000 |
| Regime Level | Country | ||
| Controls | |||
| Allow Tax Recovery | No | Allow Tax Exemptions | Yes |
| Allow Override and Entry of Inclusive Tax Lines | No | Allow Tax Exceptions | Yes |
| Defaults | |||
| Tax Currency | USD | Allow Multiple Jurisdictions | Yes |
| Minimum Accountable Unit | .01 | Allow Tax Rounding Override | Yes |
| Rounding Rule | Nearest | Exchange Rate Type | Corporate |
| Tax Precision | 2 | Use Legal Registration Number | No |
| Allow Tax Inclusion | Standard Non-Inclusive Handling | Allow Cross Regime Compounding | No |
| Configuration Options (if defined from tax regime) | |||
| Party Name | Party name | Configuration for Product Exceptions | Common Configuration |
| Configuration for Taxes and Rules | Common Configuration | Effective From | 1-Jan-2000 |
Party Tax Profile Setup
| Field | Value | Field | Value |
|---|---|---|---|
| First Party Legal Entity | |||
| Party Type | First Party Legal Entity | Country Name | United States |
| Party Name | Party name | ||
| Main Information | |||
| Set for Self Assessment/Reverse Charge | No | Rounding Rule | Nearest |
| Rounding Level | Header | Set Invoice Values as Tax Inclusive | No |
| Configuration Options (if defined from party tax profile) | |||
| Tax Regime Code | US SALES AND USE | Configuration for Product Exceptions | Common Configuration |
| Configuration for Taxes and Rules | Common Configuration | Effective From | 1-Jan-2000 |
| Field | Value | Field | Value |
|---|---|---|---|
| First Party Legal Establishment | |||
| Party Type | First Party Legal Establishment | Country Name | United States |
| Party Name | Party name | ||
| Tax Registration | |||
| Tax Regime Code | US SALES AND USE | Tax Jurisdiction Code | US CA STATE SALES |
| Tax | US STATE SALES | Effective From | 1-Jan-2001 |
| Tax Registration Number | 567890 | Rounding Rule | Nearest |
| Set as Default Registration | Yes | Set Invoice Values as Tax Inclusive | No |
| Tax Registration Status | REGISTERED | Set for Self Assessment/Reverse Charge | Yes |
| Source | Explicit |
Tax Setup
There are three taxes under the US SALES AND USE tax regime for city, county, and state sales. The example below is for state sales. All setup values are the same for the three taxes.
| Field | Value | Field | Value |
|---|---|---|---|
| Main Information | |||
| Tax Regime Code | US SALES AND USE | Tax Currency | USD |
| Configuration Owner | Global Configuration Owner | Minimum Accountable Unit | .01 |
| Tax Source | Create a new tax | Rounding Rule | Nearest |
| Tax | US STATE SALES | Tax Precision | 2 |
| Tax Name | US State Sales | Exchange Rate Type | Corporate |
| Tax Type | Sales | Reporting Tax Authority | US STATE Tax Authority |
| Effective From | 1-Jan-2000 | Collecting Tax Authority | US STATE Tax Authority |
| Geography Type | State | Applied Amount Handling | Prorated |
| Parent Geography Type | Country | Set as Offset Tax | No |
| Parent Geography Name | United States | Set Tax for Reporting Purposes Only | No |
| Controls | |||
| Allow Tax Inclusion | Standard Non-Inclusive Handling | Use Legal Registration Number | No |
| Allow Override and Entry of Inclusive Tax Lines | No | Allow Duplicate Tax Registration Numbers | Yes |
| Allow Tax Rounding Override | Yes | Allow Multiple Jurisdictions | Yes |
| Allow Override for Calculated Tax Lines | Yes | Allow Mass Creation of Jurisdictions | Yes |
| Allow Entry of Manual Tax Lines | Yes | ||
| Tax Account Controls | |||
| Tax Accounts Creation Method | Create Tax Accounts | ||
| Tax Recovery Controls | |||
| Allow Tax Recovery | No | Allow Secondary Recovery Rate Determination Rules | No |
| Allow Tax Recovery Rate Override | No | Allow Tax Rate Rules | Yes |
| Allow Primary Recovery Rate Determination Rules | No |
Tax Status Setup
| Field | Value | Field | Value |
|---|---|---|---|
| Main Information | |||
| Tax Regime Code | US SALES AND USE | Tax | US STATE SALES |
| Configuration Owner | Global Configuration Owner | Tax Name | US State Sales |
| Standard Status | |||
| Tax Status Code | US STATE SALES STANDARD | Effective From | 1-Jan-2000 |
| Name | US State Sales Standard | Set as Default Tax Status | Yes |
| Reduced Status | |||
| Tax Status Code | US STATE SALES REDUCED | Effective From | 1-Jan-2000 |
| Name | US State Sales Reduced | Set as Default Tax Status | No |
| Zero Status | |||
| Tax Status Code | US STATE SALES ZERO | Effective From | 1-Jan-2000 |
| Name | US State Sales Zero | Set as Default Tax Status | No |
| Default Controls (all statuses) | |||
| Allow Tax Exemptions | Yes | Allow Tax Rate Override | Yes |
| Allow Tax Exceptions | Yes |
Tax Jurisdiction Setup
This setup is for the California state tax jurisdiction.
| Field | Value |
|---|---|
| Tax Jurisdiction Code | US CA STATE SALES |
| Tax Jurisdiction Name | US California State Sales |
| Tax Regime Code | US SALES AND USE |
| Tax | US STATE SALES |
| Geography Type | State |
| Parent Geography Type | Country |
| Parent Geography Name | United States |
| Geography Name | California |
| Precedence Level | 1 |
| Effective From | 1-Jan-2000 |
| Set as Default Tax Jurisdiction | Yes |
| Default Effective From | 1-Jan-2000 |
Tax Rate Setup
This example shows the standard state tax rate. The setup for reduced and zero is the same, except for the special reduced percentage rate and a zero percentage rate.
| Field | Value | Field | Value |
|---|---|---|---|
| Main Information | |||
| Tax Regime Code | US SALES AND USE | Tax Status Name | US State Sales Standard |
| Tax Regime Name | US Sales and Use | Tax Rate Code | US STATE SALES STD RATE |
| Tax | US STATE SALES | Configuration Owner | Global Configuration Owner |
| Tax Name | US State Sales | Rate Type | Percentage |
| Tax Status Code | US STATE SALES STANDARD | ||
| Rate Period | |||
| Percentage Rate | 6.25 | Default Effective From | 1-Jan-2000 |
| Effective From | 1-Jan-2000 | Set as Default Rate | Yes |
| Allow Tax Exemptions | Yes | Allow Ad Hoc Rate | Yes |
| Allow Tax Exceptions | Yes | Adjustment for Ad Hoc Amounts | Tax Rate |
