Set up tax determining factor sets to group together related tax determining factors. You create determining factor sets for:

• Tax rules, to associate with rule types for tax determination. You use tax determining factors as building blocks in the creation of tax conditions.

• Regime determination, to identify tax regimes and candidate taxes on transactions. You use location type determining factors only to identify the eligible locations on the transaction.

A tax determining factor is an attribute that contributes to the outcome of a tax determination process, such as a geographical location, tax registration status, or a fiscal classification. Tax determining factors are categorized into logical groupings called determining factor classes, such as Accounting or Geography.

Each determining factor class contains one or more determining factor names that constitute the contents of the class. Some determining factor classes also contain class qualifiers. A class qualifier provides a more specific classification of a determining factor class, such as accounting flexfield segments or the transaction locations of a geography or party (Ship From, Ship To).

The result of a determining factor class, and its class qualifiers and determining factor names, is a list of available factors for use with tax conditions. Each tax condition within a tax condition set must result in a valid value or range of values for tax determination. See: Setting Up Tax Condition Sets for more information.

A tax determining factor is an attribute that may be used by the E-Business Tax engine to find and calculate taxes for a specific transaction. During implementation, the E-Business Tax rule engine allows you 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 these exist a:

• Qualifier

• Factor Name

• Factor Value

The following provides an example:

• Determining Factor Class = Geography (The type of factor that is available).

• Class Qualifier = Ship To, Bill To, POA, POO, Ship From, Ship To (The levels that you can select for evaluation).

• Determining Factor Name = Country, Province, City, County, etc. (The geography types defined in TCA).

• Determining Factor Value = Canada, Ontario, Toronto, and so on (The actual values associated with the factor previously selected).

Before you can set up a tax determining factor set, you must complete these setup tasks for determining factors:

• For each user-defined determining factor class, set up all of the determining factor names that you need.

• For each determining factor class, set up the values for each determining factor name to make available to tax conditions.

This table describes, for each determining factor class, the class qualifiers, seeded and user-defined determining factor names, and the values that are used for each determining factor name.

You can use the Tax Determining Factors page to view each tax determining factor class and its determining factor names, both seeded and user defined.

Tax Rules can reference as many determining factors as necessary to satisfy the criteria in your rule. This allows for multi-conditional situations to be addressed in individual rules.

A rule might state, if the Ship-To is Not the same as the Ship-From and the Item being sold is a Good (as opposed to a service) then apply tax X. This can be satisfied by creating a tax rule that considers both the geography for the ship-to party, the geography for the ship-from party and the product fiscal classification (three determining factors in total).

For more information on how to create these objects, review My Oracle Support Note 1111553.1, How To Setup Condition Sets and Determining Factor Sets for Tax Rules in R12 E-Business Tax (EBTax).

Fiscal Classifications

Fiscal Classifications is a way that a tax authority classifies each part of a transaction. Fiscal Classifications can be used as follows:

• Parties and party sites involved in the transaction.

• Products involved in the transaction.

• Nature of the transaction.

• Documents associated with the transaction

Set up tax determining factor sets to use in the creation of tax rules. A determining factor set is a grouping of determining factors that are considered together in the course of evaluating tax rules. You can maintain and reuse a tax determining factor set that you create for one rule with another rule for a different tax or a different rule type, where requirements are identical. You can set up determining factor sets in advance to use with tax rules, or set up a determining factor set during the creation of a tax rule.

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

In order to improve efficiency and reduce processing time, consider these factors when creating a determining factor set:

• You can use one determining factor set as a superset of determining factors to create multiple tax condition sets. Apply this option using expert rule entry. If a determining factor is not always needed in tax conditions, set the required option to No.

• Use the minimum number of determining factors necessary to process all conditions required by the tax rule.

• Avoid including a determining factor that is rendered unnecessary by another, more specific, determining factor. You can use a determining factor class one time to define a determining factor set. For example, you may not need to include the Product Type and Product Category determining factors in the same determining factor set.

• Use a coding and naming convention that clearly identifies the use of each determining factor set.

• Ensure that you have completed the prerequisite setups for each determining factor class in the determining factor set.

After you set up a determining factor set, you can set up tax condition sets. See: Setting Up Tax Condition Sets for more information.

Prerequisites

Before you can set up determining factor sets for tax rules, you may need to complete one or more of these tasks. Some optional tasks are mandatory, if required by the determining factor class:

• Set up tax regimes. (optional)

• Set up ledgers. (optional)

• Set up TCA geography hierarchy structures. (optional)

• Set up TCA party classifications. (optional)

• Set up party tax profiles. (optional)

• Set up fiscal classifications. (optional)

• Set up tax classification codes. (optional)

• Set up tax zones types and tax zones. (optional)

There are two methods to create a determining factor set. You can either create the set manually or you can use the Guided Rule Entry which will dynamically create the set for you as part of the flow. This example will focus on Manual Creation as it more clearly demonstrates the process and the structure of a determining factor set.

To set up a determining factor set for tax rules:

1. Navigate to the Create Tax Determining Factor Set page.

2. Enter a code and name for the tax determining factor set.

3. Select the set usage Tax Rules.

4. If you intend to use the Accounting determining factor class, enter the ledger to use with this determining factor set.

   The ledger accounting segments become available for use as tax condition values.

5. If you intend to use the Party Fiscal Classification, Product - Inventory Linked or Transaction Fiscal Classification determining factor class, enter the tax regime code to use with this determining factor set.

   You must enter a tax regime code that is assigned to the party fiscal classification, Inventory-based product fiscal classification, or transaction fiscal classification that you intend to use with this determining factor set. Each of these determining factor classes must have the same tax regime assignment.

6. Enter the tax determining factors for this determining factor set. See: Determining Factor Classes and Tax Condition Values for information about the contents and usage of each determining factor class.

   Each determining factor must have a determining factor class and determining factor name. In addition, if it is possible to associate a determining factor class with more than one value on the transaction, then you must enter a class qualifier. A class qualifier is mandatory for these determining factor classes:

   • Geography

   • Party Fiscal Classification

   • Registration

     You can optionally specify a class qualifier for these determining factor classes:

   • Accounting

   • Document

   • Product - Non-Inventory linked

   • Transaction Generic Classification

     Determining factors mainly refer to class qualifiers and determining factor names. Therefore, you can use the same determining factor class as often as necessary to include all of the class qualifiers and determining factor names you need. For example, a determining factor set may require both the Ship From and Ship To class qualifiers of the Geography determining factor class.

7. Set the Required option for each determining factor:

   • Yes - The determining factor applies to all tax condition sets that use this determining factor set.

   • No - The determining factor is optional for all tax condition sets that use this determining factor set.

Tax regime determination is the first step in the tax determination process. A regime determination set differs from tax rule determining factor sets in that the determining factors are location types only. E-Business Tax compares the location types in the active regime determination set to the locations specified on the transaction to identify the countries associated with each location and the tax regimes associated with each country. See: Determining Applicable Tax Regimes and Candidate Taxes for more information.

This table lists the determining factor class and determining factor names available for regime determination sets:

By default, the active regime determination set for all Payables and Receivables transactions for all configuration owners is Determine Applicable Regimes (TAXREGIME). This regime determination set contains all location types except Paying Location.

You can set up alternative regime determination sets and assign them to specific configuration owners and application event class combinations. You may want to do this, for example, if you know that the transactions of an event class require fewer location types to derive the eligible tax regimes.

E-Business Tax also provides the seeded regime determination set STCC (Standard Tax Classification Code) for use with tax classification codes and migrated data. The STCC regime determination set uses the single determining factor Tax Classification Code instead of the Transaction Input Factor and location types. See: Using Tax Classification Codes for more information.

Prerequisites

Before you can set up a regime determination sets, you may need to complete one or more of these tasks:

• Set up tax regimes. (mandatory)

• Set up tax zones types and tax zones. (optional)

To set up a regime determination set:

1. Navigate to the Create Tax Determining Factor Set page.

2. Enter a code and name for the tax determining factor set.

3. Select the set usage Tax Regime Determination.

4. Enter the location types to use as determining factors for this regime determination set.

   Include only the location types that appear on transactions for the applicable configuration owner/event class combination.

5. Set the regime determination level for each determining factor:

   • Country - Regime determination occurs at the country level for this location type.

   • Zone - Regime determination occurs at the tax zone level for this location type.

6. Assign the regime determination set to the configuration owner and event class. See: Setting Up Configuration Owner Tax Options for more information.