How to Set Up a Tax Code to Allow 4 Decimal Places

  • by Paul Ovigele, ERP Financials Consultant
  • July 8, 2014
Learn how to complete a series of steps to allow an SAP system to accept four-decimal entries in tax tables. This helps you deal with situations in which the tax authorities introduce new tax rates that have four decimal places or more. The extra decimal place may not be significant if the rate is calculated on small amounts, but it could become significant when dealing with purchases (or sales) in the millions (in monetary terms).
Learning Objectives

By reading this article, you will learn how to:

  • Create a workaround to allow an SAP system to accept four-decimal entries in tax tables
  • Create new condition types for a tax rate
  • Create a new calculation formula for a tax procedure
Key Concept

A condition type is used for different functions, such as differentiating between different kinds of discounts, different output types, or different strategy types in batch determination. In this example, it is used to distinguish different tax types and bases that are used for calculating sales taxes.

The standard tax tables (accessed via transaction code FTXP) are used to store the tax rates for various tax codes that are applicable for different countries as well as for different tax jurisdictions in countries such as Brazil, Canada, India, and the United States. However, this table does not allow you to enter a tax rate with more than three decimal places.

In most cases, this is sufficient, because a three-decimal place percentage means that the rate calculates at five decimal places (e.g., 3.685 percent is the equivalent of .03685). However, there are some cases for which a four-decimal place percentage is required (e.g., California’s new resale of capitalizable items tax). This setting cannot be altered in the standard system without a major restructuring of the tables. Even SAP’s key tax software partner, Vertex, allows only three decimal places. Therefore, a workaround is required. I describe this workaround using California’s resale of capitalizable items tax (3.8125 percent) as an example.

The steps that are needed to implement this workaround are as follows:

  1. Create new condition types
  2. Create a new transaction key
  3. Change the tax procedure
  4. Configure a tax account
  5. Create a new calculation formula
  6. Insert the formula in the tax procedure
  7. Enter the tax rate

Paul Ovigele

Paul Ovigele is the founder of ERPfixers, an online micro-consulting platform (http://www.erpfixers.com). He has worked as an ERP financials consultant since 1997 in both North America and Europe, specializing in implementing the FI and CO modules along with their integrated areas for companies in industries such as consumer goods, chemicals, logistics, pharmaceuticals, apparel and entertainment. Paul has delivered numerous training sessions to finance professionals at both the functional and managerial levels, and he has presented at various SAP financials conferences around the world.

 

See more by this author


Comments

No comments have been submitted on this article. 


Please log in to post a comment.

To learn more about subscription access to premium content, click here.