Handling tax on freight in US – Taxware

Hello… its been long time.

There are couple ways in which taxation on freight can be handled and this post applies only to systems using Taxware for tax calculation.

Freight as a separate line item in sales order

I suggest to use this method if you are using multiple shipping methods (title passed at ship-to point, title passed at ship-from point etc)

The only way to handle multiple shipment methods and tax freight according is by using product codes. Taxware delivers standard set of product codes that automatically determines the tax rates accordingly. You can see how the system applies taxes under each of these codes by using tax008 to list the file. Here are some examples

40000 – Title to the goods passes to the purchaser at the purchaser’s location.

43000 – Title to the goods passes to the purchaser at the sellers location. etc

These product codes are maintained in TTXP table. Here internal product codes are mapped to external (taxware) product codes. Internal products codes are assigned to the tax code properties in transaction FTXP

So in this method, a freight material has to be maintained in  the sales order and an appropriate tax code with the relevant product code assigned to it will determine the right taxes.

Freight as a condition type in pricing

This method is recommended only if one method of shipping is used by the company. Product codes can not be used in this scenario because it applies to the gross amount and freight amount on the line item. There are few steps that need to be maintained.

1. Gross Amount and Freight amount need to be sent to taxware in different fields.

• In pricing procedure maintain any of 1-6 numbers in the subtotal field for the freight condition type. Make sure that this number is not assigned to any other condition types.
• In enhancement “FYTX0002” Maintain the following code “ch_user_changed_fields-freight_am = i_input_user-kzwi(1-6)”. This step copies the condition value in to the freight amount field sent to Taxware. In pricing procedure make sure to exclude this amount from gross amount used for tax calculation. If not this might lead to multiple tax calculation on freight.

2. Maintain”taxfrtpd” file in Taxware

In the file “taxfrtpd” we maintain which states in US are taxable and which are not. This is a binary file when 1 – taxable and when 0 – non-taxable applies to states arranged chronologically.

This method is useful for US shipments who doesn’t want to create a separate freight material and use condition type instead.