About custom tax rules, custom codes, and custom attributes
It is possible to create custom rules, codes, and attributes in Tax Determination if the standard rules do not meet your business needs.
Using any of the features mentioned in this article requires a complex knowledge of the software and could compromise your standard tax settings. If you think you need to create a custom rule or code, ask for help from Support or Professional Services. They will check if there are existing standard rules that you can use and help create custom ones if needed without jeopardizing your setup.
Custom tax rules
If you have a special tax rate or fee for certain products in only a few jurisdictions, you can create a custom rax rule that will apply this special rate to a certain product or products in certain jurisdictions only. Check with Support or Professional Services to see if the rate you are looking for already exists in Tax Determination.
Custom Good/Service Codes
You have a product for which Sovos has not created a standard Good/Service Code yet
You disagree with the tax rules associated with an existing Good/Service Code
Before you start creating a custom code, check in with Professional Services because the Good/Service Code you need might already be in the works and will be soon released.
Custom attributes
The product or service
The location
Who is buying the product or service, and what they are using it for
If you want to add another layer to the tax calculation, you can create a custom attribute. For example, if you need to differentiate a job number within a transaction because that specific type of job is eligible for an exemption, you can create the JOB NUMBER custom attribute. When the custom attribute is ready, custom attribute-based tax rules can be created and associated with specific tax jurisdictions and organizations.
Data Editor
Using the Data Editor will have the same effect as if you modified your ERP's settings without having to make those modifications in the ERP itself. While you can change the input you are passing into Tax Determination or refine the output messages, you can't change tax rules or tax rates.
There are three common ways to use the Data Editor.
- If your ERP doesn't have certain fields that are needed in Tax Determination for accurate tax rate determination
- You can assign the required value to an existing field in the Data Editor with the help of the input rule. For example, if you only have ShipTo and ShipFrom fields in your ERP but the Location of Order Approval is necessary to determine the most accurate tax rate, you can equate the ShipFrom field with the Location of Order Approval in the Data Editor.
- If a message with specifics contents needs to be sent to your ERP about how a certain transaction was handled in Tax Determination
You can create an output rule to trigger a message to your ERP if certain conditions are satisfied. For example, if a message needs to be returned to the ERP stating that no sales tax is applied when the transaction involves a sale of raw materials to a customer in North Carolina, you can create this rule in the Data Editor.
If you need to break out one line item into several line items and allocate each of them a tax rate based on a specific rule. The allocation rule in the Data Editor lets you create rules to split one line item of a transaction into several ones and assign them individual tax rates. Example: You need to allocate the purchase of a software license across the three states where it is used. You can create an allocation rule in the Data Editor that assigns a percentage of the total gross amount to each of the three locations where the software license is used. Tax Determination can then calculate the taxes due by applying each location's tax rule to that location's percentage of the total gross amount.
- If you need to break out one line item into several line items and allocate each of them a tax rate based on a specific rule
The allocation rule in the Data Editor lets you create rules to split one line item of a transaction into several ones and assign them individual tax rates. Example: You need to allocate the purchase of a software license across the three states where it's used. You can create an allocation rule in the Data Editor that assigns a percentage of the total gross amount to each of the three locations where the software license is used. Tax Determination can then calculate the taxes due by applying each location's tax rule to that location's percentage of the total gross amount.
Overriding default tax rules on discounts and freight-related costs
Tax Determination has default tax rules that decide if discounts and costs related to shipping and handling should be subtracted from the taxable amount in a specific taxing jurisdiction or not. You can override these decisions if necessary.