Tax engines

Lets talk about Tax Engines.

Tax engines work coupled with ERP systems like SAP or Oracle Apps.
If I really dilute it down, ERPs are used to manage purchases and sales of a company. 

If we take the purchase side, companies need a lot of stuff for their daily operations. So they have to purchase those from various vendors. Along with the products or services they bought, vendors send an invoice for the same as well. There will be tax on these invoices. We need to pay tax on purchase to vendor.( To know how indirect taxes work, refer to my previous post)

Before paying the invoice with tax, there will be a validation phase during which, the tax vendor has put in, will be analysed. Taxes vary for n number of reasons. example invalid data, different place of usage etc.(More details read here) Let's use a tax engine here

Enter Tax Engine. It has its own vanilla set of rules provided by the tax reasearch team of the tax engine provider. In our case I work with Onesource indirect tax engine(Previously Sabrix ) so Onesource provides this data. Plus we can customise the tax rules as needed by our company requirements. 

Now tax engine can calculate tax Using information provided on invoice and tax rules of tax engine. Tax engine sends back the tax results to ERP. Then ERP can validate to determine if the tax calculated is accurate and ready to pay the invoice or does it needs another look.

 #oracle #tax #sap #taxes #sabrix #onesource 

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