Tax Elements
Every country in the world has a unique system for assessing taxes. However, most systems share common elements. Since these elements may be common across diverse geographical regions, basic tax setup data is defined at the database level. This avoids having to repeat similar setup in a multiple-domain environment.
The basic tax elements defined system-wide include the following:
• Business transactions can be subject to many kinds of taxes—sales taxes, domestic import duties, inventory transfer taxes, royalty fees, and so on. In GTM, a tax that is specific to a region and individually calculated and reported is a tax type.
• Regions that assess tax include countries (or groups of countries), states, provinces, counties, districts, and cities. In GTM, a region that assesses tax is a tax zone.
• Within a tax zone, a tax can affect all people and items, or only some of them. In GTM, customers, suppliers, and items can be grouped by tax class.
• Similarly, a tax can be assessed at a different rate based on a customer’s operation or how items are used. GTM can group people and items by tax usage.
• The three factors that can determine which tax types apply to a transaction are the ship-from and ship-to tax zones and the tax class of the customer or the supplier. In GTM, the set of tax types for a specific ship-to/ship-from zone and tax class combination is a tax environment.
These elements are then combined to define domain-specific tax rates. Each tax type can have multiple tax rates for different item tax classes, tax usages, and transaction tax dates. GTM selects the rate most appropriate for a particular transaction.