A tax jurisdiction is a geographic region or tax zone where a specific tax authority levies a tax. A tax jurisdiction specifies the association between a tax and a geographic location.
At transaction time E-Business Tax derives the jurisdiction or jurisdictions that apply to a transaction line based on the place of supply. The place of supply is the location where a transaction is determined to take place for a specific tax. E-Business Tax either uses a default place of supply or derives a place of supply based on tax rules. See: Tax Determination Processing for more information.
You also use tax jurisdictions to define jurisdiction-based tax rates. A tax jurisdiction tax rate is a rate that is distinct to a specific geographic region for a specific tax. For example, the tax defined as California city sales tax can have different rates for each city tax jurisdiction.
You must set up at least one tax jurisdiction for a tax before you can make the tax available on transactions. See: Updating a Tax for more information.
A tax can apply to multiple jurisdictions, such as California county sales tax to all counties or Canadian Goods and Services Tax to many provinces. If you enable multiple jurisdictions for the tax, you can create multiple tax jurisdictions at once based on the geographic hierarchy defined for the tax. You can only do this if the tax uses the TCA master geography. See: Mass Creating Tax Jurisdictions for more information.
In addition, in some cities a different city rate applies to the incorporated area of the city, called the inner city. In these cases you can set up an inner city tax jurisdiction with its own rate for the applicable customers and Receivables tax. Inner city tax jurisdictions are often based on postal code groupings. See: Setting Up Tax Zones for more information.
If the legal jurisdiction and tax jurisdiction are based on the same geopolitical level (usually a country) and are governed by the same authority, you can set up a tax jurisdiction when you set up your company legal entity. See: Setting Up Legal Entity for more information.
Before you can set up tax jurisdictions, you may need to complete one or more of these tasks:
Set up taxes (mandatory).
Set up tax statuses. (mandatory to set up jurisdiction-based rates)
Verify or set up the TCA master geography. (mandatory to set up jurisdictions below the country level)
Set up tax zones. (optional)