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Mass Update of Tax Classification Material in Material Master using

Direct Input Method (LSMW)

By Chirag Modi, Infosys

We had a requirement of mass updating tax classification material in material master. We achieved this
requirement by using LSMW (Direct Input Method). This document explains the various steps involved in
using Direct Input Method for updating Tax Classification Material.
Before explaining the steps let us go through what tax classification material is in material master.
Tax category in Material Master
As per OSS Note 872449 - Tax determination in Sales and Distribution, the plant assignment to the sales
organization impacts the data in the material master. The note indicates,
The tax classification of the material determines whether the material is fully, half or not liable for tax. Due
to this classification, different tax rates can be determined. The tax classification is determined from the
material master and you can change it manually in the sales distribution document at item level. The
system displays the countries provided in the material master in the Sales and Distribution area: Sales
organization, from the plant assignment (plant country) for the distribution channel and division
(transaction OVX6).
In this case, you can store a tax classification for each tax category or condition and country.
Tax data is maintained in the material master in conjunction with the settings made in Customizing for
The relevant settings are:

Assignment of plants to sales organization

Assignment of country to plant

Assignment of country to sales organization (via company code)

Tax per country.

Note that whenever you make changes in configuration side, you need to create new material master and
Maintaining Tax Category in SAP
Tax Category displayed in the Material Master record depends on: 1) Material Sales Organization.

2) The country of each plant assigned to that Sales Organization.

Once the required enterprise setup is in place, you can maintain tax categories against a country in
transaction OVK1.

Multiple tax categories can be maintained against a single country as highlighted in the above screenshot
of t-code OVK1.
Transaction Table - TSTL

Example - For Tax Country Code "IN" (India)

Maintaining Tax Classification against Tax Category

You can maintain tax classification material against tax category in transaction OVK4.

Generally there are 3 values for tax classification material

1) 0 - Tax Exempt
2) 1 - Full Tax

3) 2 - 50% Tax
Transaction Table - TSKM

Example - For Tax Category "JTX1", tax classification materials maintained in TSKM Table

Step 1: Before going to LSMW Process, create flat files as shown below with the delimiter as
Header File

WERKS - Plant
VTWEG - Distribution Channel
VKORG - Sales Org.
MATNR - Material

Item File

MATNR - Material
VKORG - Sales Org.
TAXM1 - Tax Classification Material (To be updated)
TAXY1 - Tax Category
ALAND - Country Code
Step 2: Create an Object in T-Code: LSMW