Follow these steps to configure external tax determination in SAP.

1. Open configuration settings in Transaction SPRO.
   1. Go to Transaction SPRO (Customizing: Execute Project).
   2. Click SAP Reference IMG.
2. Define physical destination.
   1. In Transaction SPRO, go to Financial Accounting (New) > Financial Global Settings (New) > Tax on Sales/Purchases > Basic Settings > External Tax Calculation > Define Physical Destination.
   2. Click Create to create a new connection.
   3. Enter the following information:

      RFC Destination

      This is the name that SAP uses for the RFC Destination.

      Connection Type

      Select T - TCP/IP Connection.

      Description

      These are optional fields that you can use to describe the connection. You can enter Tax Determination or Tax Determination connection to show that this is a connection to Tax Determination, or you can leave these fields blank.

      Activation Type (Technical Settings tab)

      Select Registered Server Program.

      Program ID (Technical Settings tab)

      This value needs to match the Program ID configured in the connector installation.

   4. On the Unicode tab, select Unicode in the Communication Type with Target System section.
   5. Click Save.
      Tip:

      The Save button is located in the toolbar at the top of the screen.

3. Check the connector connection.
   1. Make sure the connector is running, then click Connection Test.
   2. Save the connection, then go back to Transaction SPRO.
      If the connection isn't working, the Result column will show the error and its description.
4. Assign country to calculation procedure.
   1. In Transaction SPRO, go to Financial Accounting (New) > Financial Global Settings (New) > Tax on Sales/Purchases > Basic Settings > Assign Country to Calculation Procedure.
   2. Go to the country where you want to activate external tax determination and enter the appropriate procedure. Click Save.

      • For the US, use TAXUSX in SAP ECC and 0TXUSX in SAP S/4HANA.

      • For Canada, use TAXCAJ in SAP ECC and 0TXCAJ in SAP S/4HANA.

5. Specify structure for tax jurisdiction code.
   1. In Transaction SPRO, go to Financial Accounting (New) > Financial Global Settings (New) > Tax on Sales/Purchases > Basic Settings > Specify Structure for Tax Jurisdiction Code.
   2. If the procedure you entered in the previous step appears in the list, change its structure to 9000. If not, click New Entries and add it. Save your changes.
      
6. Define number ranges for external tax returns.
   1. In Transaction SPRO, go to Financial Accounting (New) > Financial Global Settings (New) > Tax on Sales/Purchases > Basic Settings > External Tax Calculation > Define Number Ranges for External Tax Returns.
   2. To set the number ranges, click Intervals.
   3. If you don't see the number range interval 01 in the No. column, add the interval by clicking the Insert Line icon.
   4. Enter your values, then click Save.
7. Activate external tax calculation.
   1. In Transaction SPRO, go to Financial Accounting (New) > Financial Global Settings (New) > Tax on Sales/Purchases > Basic Settings > External Tax Calculation > Activate External Tax Calculation.
   2. To set up the connection, enter and save the following information:

      External System

      Enter A.

      Tax Interface Vers.

      Select TAXDOC00.

      RFC Destination

      Enter the RFC destination created in Define physical destination.

      Update RFC Destination

      Enter the RFC destination created in Define physical destination.

      TC

      Select the checkbox.

8. Activate external updating.
   1. In Transaction SPRO, go to Financial Accounting (New) > Financial Global Settings (New) > Tax on Sales/Purchases > Basic Settings > External Tax Calculation > Activate External Updating.
   2. In the Change View "View for Component EXTX": Overview window, select the checkbox in the Active column. Click Save.
9. Maintain tax codes.
   1. Go to Transaction FTXP.
   2. In the Country pop-up, enter the code of the country you want to configure, then select the Check icon.
   3. On the next screen, enter the tax code you want to maintain, and press Enter.
   4. in the Percentage rates section, enter 100 in the Tax Percent. Rate field for each Cond. Type.
      SAP automatically adds the comma and three zeroes to the end of the number. The Cond. Type values may be different depending on the tax code you entered.
   5. Click Save.
   6. Optional: Repeat this process to update all tax codes.
      You can find a list of tax codes at Tax code condition record (SAP).
10. Set a mock jurisdiction code for non-tax-relevant transactions.
    1. Go to Transaction OBCL (Change View "Allocate Co.Cd. -> Non-Taxable Transactions": Overview).
    2. Look for the company code used in the country you are configuring. In the same row, enter 000013072 in the Jurisdict. Code field.
    3. Click Save.