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Oracle E-Business Tax (EBTax) Categories are Critical to Tax Success

by | Apr 19, 2018 | Oracle EBTax, Sales Tax, VAT/GST

EBTax CategoriesProduct categories, or purchasing categories, are one of the key drivers for tax outcomes in almost any tax calculation tool. Oracle E-Business Tax or EBTax as so many affectionately refer to it, is no different. In fact, categorization of what you sell or buy is a cornerstone of how EBTax work is leveraged to calculate Sales and Use Tax or VAT.

Oracle Categories (Inventory or Non-Inventory based)

Oracle EBTax provides two ways to leverage categories in tax determination, Inventory based and Non-Inventory based. The Inventory based are exactly as they sound they are based on a category setup from the Oracle Inventory module. The Non-Inventory based are clearly not Inventory based but rather a setup that is done in EBTax so that Categories can be leveraged where Inventory is not Installed.

Categories mapping Starts at the Beginning

One of the first steps in any EBTax regime rollouts is to get the Product Categories mapped properly to tax statuses(rates.) The category list needs to be worked. Cleaned up, validated and then mapped to the proper tax outcomes. So when we start a new install tax effort the first thing we ask for is the category list.

Who Decides the Tax Status

So now you have your solid, cleaned up, pristine list of categories you now need to get them mapped to tax outcomes. So say you have Office Supplies as a category (who doesn’t?) are those taxed a the Standard tax rate, exempt or zero etc? Many companies take the full list of categories and ship it off to their tax advisors for a ruling on either all of the categories or just the ones that the internal teams are not sure of.

All or Selective Approach in Rules?

Generally, the main source of the actual rates for EBTax tax determination deviation from standard status./rates is in the use of categories inside or Status rules.

And there are essentially two ways to approach the use of categories, all in approach or the selective approach. The all in approach basically has a status outcome for each and every category defined and does not rely on the use of a default determination outcome. Whereas, the selective approach is more a tax deviation from the standard status/rate whereby only those scenarios where the tax should not be standard i.e. exempt or reduced or zero etc would leverage categories. So in the latter case the rules would be looking for a category to see if it was in the status rule and if it found one it would use the status and the default rate from that status to deviate away from any default rate that would have otherwise been defaulted should no deviation occur.

Conclusion

Start early, get whatever categories you have at the start in shape to be able to play their role in being leverageable in your tax determination. Categories can drive deviations from standard rates or you can go all in. Any way to  decide to go, the sooner you get a good set of categories and a great categorization strategy in place the better and the more effective you tax regime will be

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