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Purchase Order Tax Determination

Hi Experts,

We have a scenario for taxes in our Purchase Order that I need help understanding.  Our Plant is based in the the NJ within the US.  Occasionally, we purchase items from a Vendor based in NJ; however, the Supplier is based in PA.  In this case, the items are taxable and subject to NJ and PA taxes.  The PA tax is 6 % and the NJ tax is 7 %.

Based on NJ tax law, "If you make a purchase in another state which has a lower sales tax rate than New Jersey, use tax is due at the rate of 7%. If, however, that state has sales tax reciprocity with New Jersey, a credit is allowed for the sales tax paid to that state." In this particular case, we are interpreting any purchase from PA to NJ will incur a PA sales tax of 6 % and a NJ sales tax of 1 % (since there is a credit with PA and the PA tax is less than the NJ tax).

In our Vendor Master, we have the Goods Supplier partner tax jursidiction populate on the Invoice Tab of the Purchase Order which will give us the PA 6 % sales tax based on our configuration within transaction FXTP.  However, the "use tax" for NJ is not determined in this fashion.  It appears that the Taxes on this tab are only in relation to the PA tax jurisdiction code which is determined on the Invoice Tab.  Under the conditions tab, we have conditions that will give us all of the necessary percentages.  However, these percentages do not appear to be reflected for the taxes under the invoice tab.

Are the taxes under the conditions tab in any way linked to those taxes determined under the invoice tab of the purchase order?  Can anyone help me understand the relationship between condition taxes (such as Condition Type NAVS) and the Taxes (under the Invoice tab) within a Purchase Order?

Thanks for your help in advance.

John

Former Member
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