In the tax calculation process in MM and FI, the sales or use tax can be computed by the system for each line item of the purchase order or invoice. Therefore, a ship-to tax jurisdiction code must be maintained, because the system requires information as to where taxes are being charged.

This ship-to tax jurisdiction code can reside on the plant, cost center, asset master, internal order, or project (WBS). If no jurisdiction code is maintained on the asset, order, or project, then the jurisdiction code of the responsible cost center maintained on the asset, order, or project defaults into the purchase order or invoice verification document at the time of document creation. This jurisdiction code is used as the ship-to destination.

In addition to the ship-to destination, taxability is also influenced by the ship-from destination. A jurisdiction code can be maintained in the vendor master record. This jurisdiction code is used as the ship-from tax destination.

Jurisdiction codes are automatically retrieved from the external tax package during creation or change of a plant, cost center, or vendor master record. This occurs after the address information has been entered on the master data. For an asset, internal order, and project, you can select F4 on the jurisdiction code field to return a list of valid jurisdictions from the external tax system.

MM and FI use country and tax code to read the tax condition records. The tax calculation procedure TAXUSX contains condition formulas (300 - 306, 311-316) which invoke the tax interface system. Once the tax interface system is invoked, a communication structure is populated with the necessary data needed by our partner tax packages to calculate taxes.

This communication structure is passed to our tax partner's API through the RFC (Remote Function Call). The tax partner's API passes this data to its tax calculation package, which in return passes the tax data back to its API. The tax partner's API then passes this information back to tax interface system onward to MM and FI.

Tax amounts and statistical rates apply to each of up to six levels of jurisdiction denoted by the condition types: XP1E - XP6E, XP1I - XP6I, and XP1U - XP6U.