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Plant abroad - tax jurisdiction issue

Jelena
Active Contributor
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We have a rather strange situation with the tax determination since upgrading to EHP6. The company is in the USA but has a plant in Mexico where some parts are manufactured. The plant has been configured with address in MX and belongs to the US Sales Org / Company. Its entered in the sales orders (VBAP-WERKS) and the parts are delivered to the customers from that plant.

Previously the taxes were calculated correctly as for the sale from the company's state to another US state, but now for sales using this Mexico plant the taxes are calculated as if the sale is within the same jurisdiction, i.e. the additional local taxes are applied, which is incorrect.

The issue was traced down to the SAP note 1172039 that have corrected some error, it seems, but created this issue for us. We use Vertex for tax calculations and taxes are calculated based on Ship-from and Ship-to tax jurisdiction. This SAP note made a change in the class CL_XTAX_RULES_CALCULATION that reads tax jurisdiction only when the plant is in US or Canada. If plant is in another country (i.e. Mexico in our case) then the Ship-from tax jurisdiction is filled in... with the same value as Ship-to.

We're still awaiting further response from SAP support (they're taking their sweet time, of course) but this approach just does not seem to make any sense. I can certainly see how having a foreign jurisdiction in the field could cause an issue, but shouldn't Ship-from be Sales Org or Company jurisdiction in this case? At least in the US taxation is driven by the sales point, not shipping point. Are we missing something in our configuration or process or is SAP code just wrong?

Thank you.

Accepted Solutions (1)

Accepted Solutions (1)

Jelena
Active Contributor
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After a long back and forth with all the parties involved it was decided to change the plant's address in the configuration to US.

An alternative option provided by SAP was to use user exit in the class CL_XTAX_RULES_CALCULATION in method ADD_INPUT_DATA_ITEM. We didn't need to use it but am adding this information here in case someone searches for the same question.

This is now resolved, thank you!

Answers (1)

Answers (1)

Former Member
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Hello Jelena,

We too have a similar situation, but the Mexico Plant is not owned by US company in our case. We use TAXWARE to calculate taxes and US Taxes are not determined in our case. We raised a OSS note and waiting for SAP's reply.

Have you added the UTXJ (US Tax Per Document  ) in the Tax Procedure TAXMX ?

Jelena
Active Contributor
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Thanks for a reply, Balaji! Our pricing / tax procedures are fine, the only issue is that incorrect "ship from" jurisdiction is fed to the tax software.

Outsourcing to Mexico is rather common in the US these days, so I'm really not sure why SAP doesn't support it a bit better...

Shiva_Ram
Active Contributor
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I never came across this scenario, however I recommend to check with Vertex support also, until you hear from SAP.

Vertex support might have come across this issue with other clients so they can throw some light on this issue.

Regards,

Jelena
Active Contributor
0 Kudos

We checked with Vertex firsthand but they can't help with that since it's just SAP filling in data incorrectly. We used debugger and everything works fine when we change the jurisdiction to the right value manually.

Still waiting for SAP... I'm just really confused why they made such strange change in the first place.