Use tax zones to group existing geographical regions that share the same tax requirement. You can use tax zones with tax regimes, to identify tax requirements for a special geographic area and to create parent tax regimes that represent a related grouping of geographic regions for tax reporting purposes. You can also use tax zones with tax rules, to create tax rules that refer to a specific geographic location.
The use of tax zones is optional and depends on your overall tax setup planning. For example, if a separate economic community exists in part of a country only, you can either set up a tax zone and corresponding tax regime for the applicable geographic area, or set up a country tax regime and use applicability rules to exclude the parts of the country where the tax requirement does not apply.
The tax zone setup makes use of the Trading Community Architecture (TCA) master reference geography hierarchy. The master reference geography hierarchy identifies the hierarchical structure of a country, such as Country: State: County: City: Postal Code in the United States, and identifies which levels are mandatory for the tax zone. A tax zone type references a specific part of a master reference geography hierarchy. You create tax zones within a tax zone type to uniquely identify tax requirements within the area defined by the tax zone type.
You can update the information in a tax zone at any time. You can also update the geographic information in a tax zone type, as long as the tax zone type does not contain tax zones. If you apply an end date to a geographic entity in TCA, then this removes all tax zones and tax zone types associated with the entity.
Before you can set up tax zones, you must verify that the TCA master geography contains the geographic information that you need. See: Setting Up TCA Geography Hierarchy for more information.
To set up a tax zone:
Navigate to the Create Tax Zone Type page.
Enter a tax zone type name. Use a name that uniquely identifies the geography and purpose of the tax zone type.
Enter the country where the tax zone type applies. E-Business Tax displays the country structure.
If this is an international tax zone type, leave the Value field blank and check the Zone Creation Allowed box.
If this is a country tax zone type, enter a value at each level of the structure that you want to make available for tax zone creation.
The highest level becomes the parent record for this tax zone type. You can create tax zones from any combination of child records.
Check the Zone Creation Allowed box for each level that you want to create tax zones.
In the Allow Postal Code Grouping region, check the "Create tax zones from groups of postal codes" box, if you plan to create tax zones for this tax zone type that consist of ranges of postal codes.
You can only check this box if:
The country has a geography explicitly defined as Postal Code; and
You enter a value in the level above Postal Code within the country structure
A group of postal codes often makes up an inner city tax jurisdiction. See: Setting Up Tax Jurisdictions for more information.
Navigate to the Create Tax Zone page using the tax zone type that you just created.
Enter a name for this tax zone. Use a name that uniquely identifies this tax zone within the tax zone type.
Enter the code type and corresponding code for the geography associated with this tax zone. The available code types are:
FIPS Code - Federal Information Processing Standards.
ISO Country Codes - International Standards Organization
Tax Geography Code - Geography code of your tax service provider.
Unknown - User-defined codes that are not associated with a coding standard.
Enter an effective date range for this tax zone.
Note: If you update the tax zone end date, this does not affect the end dates of the geographies belonging to the tax zone.
If applicable, enter the time zone of this tax zone.
Add each geography of the tax zone type hierarchy that you want for this tax zone.
If you set the Postal Code Grouping option, then when you select a geography above the level of postal code:
Indicate whether to use the entire geography or a postal code range within the geography.
If you are using a postal code range, enter the range and the start and end dates.
After you set up the tax zone, you can create a tax regime using this tax zone. See: Setting Up Tax Regimes for more information.