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Former Member

Purchase Order Tax Determination

Hi Experts,

We have a scenario for taxes in our Purchase Order that I need help understanding. Our Plant is based in the the NJ within the US. Occasionally, we purchase items from a Vendor based in NJ; however, the Supplier is based in PA. In this case, the items are taxable and subject to NJ and PA taxes. The PA tax is 6 % and the NJ tax is 7 %.

Based on NJ tax law, "If you make a purchase in another state which has a lower sales tax rate than New Jersey, use tax is due at the rate of 7%. If, however, that state has sales tax reciprocity with New Jersey, a credit is allowed for the sales tax paid to that state." In this particular case, we are interpreting any purchase from PA to NJ will incur a PA sales tax of 6 % and a NJ sales tax of 1 % (since there is a credit with PA and the PA tax is less than the NJ tax).

In our Vendor Master, we have the Goods Supplier partner tax jursidiction populate on the Invoice Tab of the Purchase Order which will give us the PA 6 % sales tax based on our configuration within transaction FXTP. However, the "use tax" for NJ is not determined in this fashion. It appears that the Taxes on this tab are only in relation to the PA tax jurisdiction code which is determined on the Invoice Tab. Under the conditions tab, we have conditions that will give us all of the necessary percentages. However, these percentages do not appear to be reflected for the taxes under the invoice tab.

Are the taxes under the conditions tab in any way linked to those taxes determined under the invoice tab of the purchase order? Can anyone help me understand the relationship between condition taxes (such as Condition Type NAVS) and the Taxes (under the Invoice tab) within a Purchase Order?

Thanks for your help in advance.

John

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1 Answer

  • Sep 19, 2014 at 07:58 PM

    Hi,

    If the condition category is N (non deductible taxes), condition class is D and cal type is B for an MM pricing condition type (in M/06), system will bring all the non deductible taxes (with account key NVV or similar) from tax procedure (invoice tab - taxes window) to MM pricing procedure (conditions tab).

    If the condition category is D along with the above combination, for an MM condition type in M/06, system will bring all the taxes (including deductible and non deductible) from tax procedure to the MM pricing procedure.

    Regards,

    AKPT


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    • Former Member

      Hi AKPT,

      Thanks for your response. The part that I am missing is around the Jurisdiction Code. In my scenario above, you will ultimately pay 7 % tax on the item purchased. However, the state of PA will tax 6 % of that purchase and the state of NJ will tax 1 % of that purchase.

      Based on the Vendor, the Jurisdication Code is coming in for the State of PA for the taxes under the Invoice Tab which will be a 6 % tax. The extra 1% tax for NJ is not within the Invoice Tab's Taxes.

      Are you saying that the only the local taxes are calculated on the Invoice Tab and those local taxes will always be passed to the Conditions tab of the PO if the condition class is defined as "Taxes"? And any additional non-local taxes will need to be handled via condition records which will populate on the Conditions tab? If this is the case, how does SAP know to send the the 1% tax to the NJ since only the 6% tax is defined for the PA jurisdiction?

      Thanks.

      John