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


FieldValueFieldValue
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

FieldValueFieldValue
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
 
FieldValueFieldValue
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.

FieldValueFieldValue
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

FieldValueFieldValue
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.

FieldValue
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.

FieldValueFieldValue
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

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