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Dependent product taxability

In some cases, your business process may call for 1 product's taxability to relate to another product on the document or invoice.
By default, you can configure each product in Determination to specify its individual taxability. The configuration is either explicit (through the configuration of a product exception and associated rules for each relevant tax authority) or implicit (using standard taxation for each authority).
For example, you may want freight, when included as a unique line item, to inherit the same product taxability as the product being shipped.

Understanding related charges

To enable taxability inheritance, Determination includes the concept of related charges (also known as dependent products), which has 2 parts:
  • A rule for the product (such as freight) whose taxability's a related charge.
  • A line in the XML invoice that ties the related product (freight) to the line number for the product it's related to (RELATED_LINE_NUMBER).
To further understand related charges:
  • A related charge gets identified in the XML input at the line level through the use of the <RELATED_LINE_NUMBER> element. This element specifies the line that contains the product whose taxability will be used. A dependent line must always appear in the XML input after the line it depends on, though it doesn't need to be the next line. The element isn't rate- or rule-specific.
  • When the transaction's processed, Determination selects the authorities to process based on the included address data. If a related charge gets included, the resulting authorities must be the same for both the parent product and related charge(s). For example, the Ship From address must be the same for both lines.
  • Once a rule is selected by Determination, it must contain a selected Related Charge check box. Apply Related Charges to custom rates or rules, not standard rules or a tax data provider.

Related charges example

For example, the product Widgets has a related charge for Freight. If the Freight is to be taxed at the Widget rate, you need:
  • A rule for Widgets
  • A rule for Freight with the Related Charge check box selected
In this example, an invoice contains 2 line items that include the following pseudo-XML. The RELATED_LINE_NUMBER element is taxed according to how LINE_NUMBER 1 gets taxed.
<LINE NUMBER>1 <PRODUCT>Widgets <LINE NUMBER>2 <PRODUCT>Freight <RELATED_LINE_NUMBER>1
  • The Ship Form and Ship To are both in Washington State.
  • The rate or fee used by the parent rule applies to both lines of the invoice.
Consider the following:
  • Related charges can be tested in Model Scenario.
  • An invoice can contain more than 1 related charge.
  • Related charges can be included in allocations.
  • Messages get returned in the XML output when dependent processing's used. In addition, the <RELATED_LINE_NUMBER> element's also returned in the <TAX> structure.
  • Rules can have both a related charge and 1 of the following, rate, rate set, exempt, or no tax. This handles the case, for example, where Freight can be a related charge, but in another case, isn't a related change and has its own rate.

This article applies to:

  • PRODUCT: ONESOURCE Determination, ONESOURCE Indirect Tax