11i AP Tax on Tax

Question

Hi,
We use AP 11.5.8.
Can we create a Tax code which will have another tax on it. (Tax on Tax)
We need to enter an invoice as follows
Expense                          10,000
Tax NBT(3% )                      300
Tax VAT(12% for 10,300)  1,236
Please let us know how to create this kind of tax on AP 11.5.8
Thanks!

Answer 1

Hi Nilaksha,
I am not sure, but found this note in metalink.
Please review if this is of any help:
How to Setup Canadian Tax As Compounding in AP [ID 361677.1]
Modified 14-NOV-2008 Type HOWTO Status PUBLISHED
In this Document
Goal
Solution
Applies to:
Oracle Payables - Version: 11.5.7
Information in this document applies to any platform.
Goal
Need to Set up a combination of Quebec Sales Tax (QST) and Canadian Federal GST Tax. Need to implement the Compounding Tax Feature as available in AR.
QST is calculated as follows:
For example:
Two Taxes : Quebec Sales Tax (QST) 7.5% and Canadian Federal GST Tax 7%
$100 purchase
$7 GST (7% of $100) : $107 subtotal
$8.03 (7.5% of $107)
$115.03 total
Solution
Compounding precedence feature for Tax Groups is available in AR module but not in AP.
Hence workarounds can be suggested to achieve this :
Workaround 1 :
If its confirmed that the Tax Code QST is 7.5% and Tax Code GST is 7% then Tax can be directly calculated with the Compounding percentage for 7.5% of 7% of the Amount which is 15.025% and set up one tax code with 15.025% as the so that the net amount will include both the taxes, but this will not provide the split up of each tax QST and GST.
Workaround 2 :
If its confirmed that the Tax Code QST is 7.5% and Tax Code GST is 7% then Tax can be directly calculated with the
Compounding percentage for 7.5% of 7% of the Amount which is 15.025% and
In Tax Group set up:
Set up Tax Code GST as 7% and
Set up Tax Code QST as 8.025% so that the net amount is also correct and you will also get the respective Tax amount calculated:
GST : 7$
QST : 8.025 $
and the Net Amount : 115.025 (115.03 rounded to 2 decimal places )
Thanks
Manish Jain.