In the nearly four years since the South Dakota vs. Wayfair decision, economic nexus laws have swept through the United States. Every state with a sales tax has passed an economic nexus law. With these changes, companies selling products or services in multiple states are much more likely to be required to charge and remit sales tax in additional states. If you’re using Oracle ERP, you may not be familiar with the different options you have for calculating sales (and use) tax in the United States.
To automate tax calculation in every version of Oracle ERP and have a real time tax call, you have to configure the Oracle tax engine. That’s true whether you are using a third party or if you’re only using the Oracle tax engine. There are several available options for calculating sales and use tax for the different states in the United States.
Oracle Cloud (Fusion) Tax Calculation
The first option is to only use the Oracle provided tax engine. You can manually configure and charge sales tax using only the Oracle tax engine, but for companies registered in multiple states, that can be a losing strategy.
A company doing business across many states will have to define all the different geographies, jurisdictions, rates and rules to calculate tax for products and services with different taxability in different states. That takes a substantial effort and it requires considerable Oracle and tax knowledge. Even after the Oracle tax solution is successfully implemented, determining the applicable jurisdiction and tax rule changes and maintaining the data and the tax rules in Oracle could end up being a full time job.
That is not the only issue. Even if you understand what should be done, implementing those rules may not be possible due to deficiencies in the Oracle tax engine. I’ll be discussing some of those in a separate blog post to be published in the near future.
If you decide that configuring and maintaining the Oracle tax engine for U.S. Sales and Use taxes (or for VAT taxes) and tax changes is too time consuming, difficult and inaccurate, what other options do you have? The good news is that there are third-party tax providers and solutions that have been certified for Oracle Cloud.
Oracle Cloud Tax Automation
Oracle Cloud has a specific tax calculation process which must be followed by every third party tax provider in order to be certified. To be certified, the tax providers must provide Geographies and the Tax Regime to Rate flow configuration files which are loaded into Oracle Cloud. There is additional tax configuration which is done by the implementer.
The tax calculation request has several steps:
- Based on configuration in Oracle Cloud, the tax call is sent to a URL for the tax provider’s integration. During the tax call, Oracle populates a number of pre-defined fields on the tax calculation services request. Those pre-defined fields cannot be changed.
- Additional data which is not included in the Oracle request (such as drop ship location or project number) can be populated by the integration layer.
- In order to do this, the integration layer must make a separate call back to Oracle Cloud and run a Business Intelligence Publisher Query/Report (BIP) to provide the additional information.
- The integration layer reformats the Oracle data, including both the original tax call data as well as any additional BIP data into the format required by the tax engine.
- The tax calculation request is sent to the tax engine.
The tax calculation response flow is a little simpler:
- The result of the tax call is returned from the tax engine to the tax integration.
- The integration maps the results back into the format required by Oracle and “maps” the results to the values available in Oracle cloud tax. Remember that all of the regime to rate flow values in Oracle cloud were defined by the tax provider, so they know and can use the exact values which were populated in Oracle Cloud.
- The tax response is sent back Oracle and the tax results are written to the transaction.
This basic flow is mandated by Oracle so every tax provider follows these basic steps.
Oracle Cloud has certified integrations by Thomson Reuters ONESOURCE, Avalara AvaTax, and Vertex O-Series (see Oracle support Doc ID 2056736.1). Perficient partners with and has experience integrating to each of these 3 tax determination engines.
How Can Perficient Help You?
With literally hundreds of successful tax automation implementations and upgrades over the past 20 years for Order Management, Depot Repair, Service Contracts, Receivables, Project Billing, Inventory, Purchasing and Payables, we are experts in the field. We have integrated Oracle EBS with all three of the major Oracle third-party tax partners. We’ve also built custom integrations between non-Oracle systems and ONESOURCE Indirect Tax, Vertex Q and O Series and Avalara AvaTax. If you’re assessing your tax calculation options, we can guide you, helping you to understand the functionality of each tax engine so that you’ll be able to make an informed decision. Once you’ve made your decision, we have the knowledge and expertise to implement the integration to put a complete and accurate tax calculation solution in place.
We’ve implemented tax solutions and integrations for more than 70 countries all over the world. Even if you only need to automate U.S. tax, we can put you on the tax automation autobahn! For more information, contact our tax automation experts today.