How To Setup Expert Tax Rules on eBTax (Doc ID 473066.

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In this Document

Goal
Solution
1. Tax Rules in Oracle E-Business Tax: Overview
2. How Tax Rules Work (An Example)
a. Understanding Tax Determining Factors
b. Setting Up A Determining Factor Set
c. Setup a Tax Condition Class
d. Expert Rule

APPLIES TO:

Oracle Payables - Version 12.2.4 to 12.2.4 [Release 12.2]

Oracle E-Business Tax - Version 12.0 to 12.1 [Release 12.0 to 12.1]
Oracle Payables - Version 12.1.3 to 12.1.3 [Release 12.1]
Information in this document applies to any platform.

GOAL

How does one setup Tax Rules using Expert Tax Rules?

SOLUTION

NOTE: Oracle strongly recommend to review the Oracle documentation on eBTax and do
several
exercises to review the functionality.

ORACLE DOCUMENTATION:

Oracle E-Business Tax

User Guide
Release 12
Part No. B25959-01

Setting Up and Using Tax Rules

1. Tax Rules in Oracle E-Business Tax: Overview

The E-Business Tax tax determination process uses your tax configuration setup and the details
on
the transaction to determine:

Which taxes apply to the transaction.

How to calculate the tax amount for each tax that applies to the transaction.

E-Business Tax tax rules let you create a tax determination model to reflect the tax regulations of
different tax regimes and the tax requirements of your business. You can create a simple tax
model that makes use of default values without extensive processing, or a complex tax model
that considers each tax requirement related to a transaction before making the final calculation.

During execution of the tax determination process, E-Business Tax evaluates, in order of
priority, the tax rules that have defined against the tax configuration setup and the details on the
transaction. If the first rule is successfully evaluated, the result associated with the rule is used. If
not, the next rule is evaluated until either a successful evaluation or default value is found.

The E-Business Tax tax determination process is organized into rule types. Each rule type
identifies a particular step in the determination and calculation of taxes on transactions.

The tax line determination process uses the information of the transaction header and transaction
line to determine the tax lines.

2. How Tax Rules Work (An Example)

Assumption: This example assumes that you are using the determine applicable regime tax
calculation method (not STCC). STCC is set as the default for all upgraded setup but cannot be
used for "fresh" installs or for newly created regimes.

The eBTax engine is driven by defaults, during the setup, the administrator had to setup a
Regime to Rate flow and default options across all steps.

If no other setup is done in eBTax, transactions will calculate taxes using the default settings.

Example of Defaults:
Responsibility: Tax Managers
Navigation: Tax Configuration > Tax Rules

Enter your configuration owner, tax regime and tax. Note that tax rules must be defined for each
Tax and cannot be re-used across multiple taxes.

Assuming no rules are defined the defaults will be used to calculate tax.
 For non-location based taxes this will mean that a single tax rate will be applied in all
cases for a specific tax (assuming the default is applicable).
For location based taxes the tax jurisdiction derived on the invoice line will cause the
application to find and use the tax rate associated with the jurisdiction from the default
place of supply rule.

We encourage you to validate that your default tax rules work as expected before you configure
additional rules. If you experience difficulties in getting your tax rules to work properly please
review Note 1082172.1 Overview and Basic Troubleshooting of Tax That Does Not Calculate in
R12 E-Business Tax (EBTAX)

Since most tax regulations have numerous exceptions and special situations it is common that tax
rules must be defined to adjust certain elements considered in the application of tax to a
transaction. Oracle E-Business Tax provides two distinct methods for tax Creation: Expert Rule
Entry and Guided Rule Entry. In general both can be used to satisfy your tax rule requirements
however expert rule entry provides enhanced capabilities to use multiple condition sets within a
single tax rule while guided rule entry typically requires multiple rules to satisfy scenarios where
different outcomes can occur.

Tax rules are executed any time an invoice is saved or completed in AR or Validated/Calculate
Tax button is pressed in AP.

For this example we will step through the creation of an expert rule and explain each step.

a. Understanding Tax Determining Factors

A tax determining factor is an attribute that may be used by rules you create in the E-Business
Tax (EBTax) engine to calculate taxes for a specific transaction. The EBTax rule engine allows
implementers to create any number of custom tax rules that reference the tax determining factors
and that satisfy the unique needs of a specific business operating within a taxing jurisdiction.

Determining factors exist in a range of categories or types (Determining Factor Classes). Within
each of class exist a Qualifier, Factor Name and Factor Value. This is best understood with an
example as shown below:

1. Determining Factor Class = Geography (This is the "type" of factor we have available to us)
2. Class Qualifier = Ship To, Bill To, POA, POO, Ship From, Ship To (These are the levels that
we can select to be evaluated).
3. Determining Factor Name = Country, Province, City, County, etc. (These are the geography
types you have defined in TCA)
4. Determining Factor Value = Canada, Ontario, Toronto, etc (these are the actual values
associated with the factor name we selected above.

To learn more about tax determining factors and to see examples of a wide variety of tax rules
created with the different determining factors, please read Note 1108463.1 How Tax
Determining Factors Work with Tax Rules in R12 E-Business Tax.
 b. Setting Up A Determining Factor Set

A Determining Factor Set is a grouping of tax determining factors created for use as part of a
Tax Rule. When creating a Determining Factor Set you specify which factors are to be evaluated
within your rule. The E-Business Tax Rule engine then extracts the values for each of these
determining factors when the rule is executed.

A Determining factor set identifies the Determining Factor Class, Class Qualifier and
Determining factor name.

For example:
Determining Factor Class: Geography
Class Qualifier: Ship To
Determining Factor Name: Country

To learn more about Determining Factor Sets please see Note 1111553.1 How To Setup
Condition Sets and Determining Factor Sets for Tax Rules in R12 E-Business Tax (EBTax)

Responsibility: Tax Managers

Navigation: Advanced Setup Options > Tax Determining Factor Sets > Create

In the example below we created a determining factor set with two determining factors.

c. Setup a Tax Condition Class

Set up tax condition sets to group together the tax conditions that constitute a tax rule. You can
set up tax condition sets in advance and apply them to a tax rule, or you can set up a tax
condition set during tax rule creation.

The tax condition set is the logic of the tax rule. It specifies the factors to consider, and the
resulting value that must exist for each factor, in order for the result of the tax rule to be true.

Each tax condition in a tax condition set consists of a tax determining factor (determining factor
class/class qualifier/determining factor name), an operator, and a value.

For Example (continuation of the prior example):

Determining Factors from Set: Geography Ship To Country
Operator: Equal To
Value/From Range: Canada

In the example below we created a condition set that uses just one of the two available
determining factors. You can use all or only a portion of the determining factors in your
condition set.
Tip: Since you can only specify one determining factor set in a single tax rule, add all of the
determining factors into your determining factor set and then create condition sets for each
combination of factors needed to derive the proper tax outcome.

Responsibility: Tax Managers

Navigation: Advanced Setup Options > Tax Condition Sets > Create

To learn more about Condition Sets please see Note 1111553.1 How To Setup Condition Sets
and Determining Factor Sets for Tax Rules in R12 E-Business Tax (EBTax)

d. Expert Rule

Responsibility: Tax Managers

Navigation: Tax Configuration > Tax Rules > Pick your Rule Name> Select Expert Rule Entry

Select the Determining Factor

Select the Condition Set and Results
Set the Rule Order
Enable the rule.

Note that each rule name has slightly different steps.

For examples of rules using different tax determining factors and to see the setup
required for each determining factor type, refer to Note 1108463.1 How Tax
Determining Factors Work in R12 E-Business Tax
Check back soon for additional Notes that will demonstrate with examples how to
setup each rule type.

Other content that may be helpful includes:

Note 577996.1 Case Study: Setup R12 E-Business Tax for Canada: Includes 2010
HST Changes
Note 463001.1 EBusiness Tax Seed Data (Includes a patch that will seed several
regimes and which loads a number of Determining Factor Sets and Condition
Sets.