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Tax on Freight Charges is Calculated in Sales Order Even if Tax Rule Exists (Doc ID 2144474.1)

Last updated on FEBRUARY 12, 2019

Applies to:

Oracle E-Business Tax - Version 12.2.3 and later
Oracle Order Management - Version 12.2.3 and later
Information in this document applies to any platform.

Symptoms

On : 12.2.3 version, Tax Set Up

Tax Calculation issue on Freight in Order Management application.

Issue: Order Management Not Passing Freight Item when calling EBTax to calculate tax on Freight.

New functionality has been introduced in R12.2 to calculate tax on freight as an enhancement request. Following setups are done in OM to calculate tax on freight.

1) Defined an Item called SHIPPING CHARGES . User item Type = Freight.

2) OM System Parameter values as below:
Inventory Item for Freight = SHIPPING CHARGES
Invoice Freight as Revenue= YES

3) Now enter a new Sales Order with Freight. Tax is calculated successfully on the Freight amount as expected.

Everything is fine until this part. Now you want to charge tax on Freight in certain states only, so you create a Tax Rule in EBTax saying if the State is Virginia and Item is SHIPPING CHARGES, then DO NOT calculate the tax for that line. Problem happens here in this scenario...

a) Now you go and enter a new sales order for state Virginia with freight.
System is calculating tax on freight. EXPECTED RESULT FOR THE SYSTEM IS NOT TO CALCULATE TAX BECAUSE OF THE TAX RULE SETUP IN EBTAX.
b) Ship and transfer the invoice into Oracle Receivables. The Freight line will be populated as Line item LINE record because of the above setups.
c) Running Autoinvoice call EBTax again to calculate tax and NO TAX is calculated on FREIGHT because AR Interface is passing the item name to the tax engine.



Cause

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