Wed 1000 Comparing Vat To Us

VAT & Sales/Use
Jeff Hilt & Theresa Pardee

Presentation Overview
GE
VAT Overview
Sales/Use Overview
Systems
Comparison
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Jeff Hilt/Theresa Pardee
ACT
Speakers
Jeff Hilt
Jeff has been with the GE Corporate Tax Systems team since 2001 supporting the Corporate Federal
team, State Income Tax team and for the last 7 years the Sales/Use and VAT/GST teams supporting
the Audit, Advisory and Compliance functions as well as the Sabrix Platform.
Theresa Pardee
Theresa is a Manager of Tax Technology with General Electric Company based out of Atlanta,
Georgia. She received her Bachelor of Business Administration in Computer Information Systems
from Georgia State University.
She has more than 17 years in various roles within the Sales & Use tax function. She has spent the
last 14 of these years integrating third party tax automation solutions like Sabrix, Vertex and Taxware
with Financial Applications.
Theresa joined GE in March 2007 after a combined 9 years at E&Y and Deloittes National Tax
Technology Solutions Practices as a senior tax manager. Since joining GE, her job responsibilities
include providing transactional tax technology solutions for various GE businesses globally.
Theresa is certified in SAP R/3 in the Sales and Distribution Module and has obtained her Oracle
Applications Team Member Implementation Masters Certification.
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GE Summary & Context
Diverse portfolio of products and services
Global footprint operating in over 120 countries
Thousands of Legal Entities
Tax, State and VAT/Sales obligations
Global Branch Structure
Various ERP and legacy billing platforms
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VAT Overview
VAT Awareness
VAT stands for Value Added Tax
A general tax that applies, in principle, to all commercial
activities involving the production and distribution of goods
and the provision of services.
A consumption tax because it is borne ultimately by the final
consumer. It is not a charge on businesses.
Charged as a percentage of price and actual tax burden is
visible at each stage in the supply chain
Over 150 countries worldwide operate VAT systems of some
description and this is likely to increase in the future as the
money collected from VAT represents a major source of
revenue to national governments
* VAT is usually a national/ federal tax, but in some countries it operates at a state/provincial level.
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VAT Awareness - EU
1967 EC Common Framework for VAT was established to
attain the objective of a common market.
The overriding law on VAT in the EC is the EC Directives,
notably Council Directive 2006/112/EC which recast the
articles of the 1st and 6th VAT Directives.
Under Article 395 of Directive 2006/112/EC, member states
may be authorized to derogate from common VAT rules to
simplify local rules.
EC Law takes precedence where there are inconsistencies
with the intent (over time) of having a harmonized system.
The VAT Package of 2010 (supply of services) is a step in that
direction.
VAT is a tax charged on any supply of goods or services
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made in <Country> where it is a taxable supply made by a
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Harmonization and Derogation
Lack of harmonization in the
EU is like, well, running a
marathon with a front loader
on your back.
What could be harmonized?

Simplified rates
Simplified returns
Harmonized rules
Invoicing and invoicing format
VAT rules to avoid double taxation
Longer deadlines for filing
Etc.
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VAT names - ROW
Canada EU - VAT
GST Goods and Services
Tax
HST - Harmonized Sales Tax
India
VAT
Brazil Service Tax
ICMS - State VAT
IPI Federal Excise Tax
Australia
ISS Municipal Service Tax
GST Goods and Services
Tax
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VAT Compliance means
Receiving compliant invoices from suppliers or you cant reclaim input VAT
Issuing sales invoices in the right format or you have customer relationship issu
Book-keeping the right VAT at the right time or you cant fill out your VAT retu
Reporting VAT in the right currency local currency using the right exchange r
Filing VAT returns at the right time with the right transactions typically calend
Settling the right VAT with the tax office pay vs. file
Maintaining the right books and records
Keeping books and records for the right period of time
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Terminology is key
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Rate Definitions
Rate Type Definition Min/Max
Allowed (EU)
Standard Highest rate covers most goods and Max 25%
services. This is the default unless a Min 15%
specifically mentioned alternate rate
applies. EU capped at 25%
Reduced Given specific relief from the Standard Min 5%
Rate Rate
Other Rates Member State derogrations various
Zero Rate Taxable but at Zero Rate e.g. Food
Exempt No VAT is chargeable
No VAT reclaim is allowed and factors
into a partial exemption calculation
Outside the Not covered by the VAT System
scope of VAT
If you are registered to collect VAT, you must charge VAT at the
standard rate unless the supply falls into one of the other
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categories. Where, When and On What is considered Jeff Hilt/Theresa Pardee
ACT
Picture yourself
Coming from
Town Centre
and want to go
to Oxford.
Always ask
your in-country
tax professional
Swindon - mini-roundabouts were invented by Frank 22

Blackmore ACT
Zero Rate of VAT?
Zero rated VAT is a rate, but at 0%.
You can reclaim VAT on your purchases for
sales related to zero rate, but not for exempt
purchases.
In the UK, the grocer Tesco, sells mostly zero
rated food, but is able to reclaim most of the
Input VAT they pay on purchases.
UK, but not strictly part of the EC rules.
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UK Rates
Non Business
Standard rate Government
departments etc
20%
Most goods and
services (taxable)
Exempt
Reduced Finance, insurance,
land, health and
rate 5% education
Domestic fuel
(taxable)
Zero rate
0%
Exports, food, books,
newspapers and
childrens clothes
(taxable)
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EU Member States(MS) and Standard
Rates
20% 20%
21% 22%
20% 21.0%
15%
15%
18%
20%
19.0%
25%
23%
20% UK SR History
23%
22% 2011 20%
24% 2010 17.5%
19.6%
20% 2008 15%
19% 1991 17.5%
20%
1979 15%
23%
16% 1974 8%
25% 25%
1973 10%
21% 20%
27 Member States not including Norway and

Switzerland 25
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2011 Rate Changes
EU
Slovak Republic 1 Jan 2011 SR increased to 20%
Poland 1 Jan 2011 SR increased to 23%, RR to 8%, LR 5%
Greece 1 Jan 2011 RR increased to 13%
United Kingdom 1 Jan 2011 SR increased to 20%
Portugal 1 Jan 2011 SR increased to 23%
ROW sample
Switzerland 1 Jan 2011 SR increased to 8%
New Zealand (GST) 1 Jan 2011 SR increased to 15%
Botswana 1 Jan 2011 SR increased to 12%
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2011 Scope of VAT Changes
EU
France 1 Jan 2011 SR also applies to TV, Phone and bundled Internet
services
Belgium 1 Jan 2011 SR also applies to buildings and land
Finland 1 Mar 2011 general postal services are exempt from VAT
ROW sample
India proposed the introduction of a new Central and State GST - delayed
China Major reform planned for 2013 with VAT replacing business tax
Zambia Property and casualty insurance and fee-based banking services
are subject to VAT at the Standard rate (16%).
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Simple Transaction B2B
Supply Goods or services. Services defined as

anything that does not constitute a good.
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Deemed Supply, Self supply Jeff Hilt/Theresa Pardee
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Further Example
Tesco Output VAT
Biz A Input VAT
Petrol purchased by a taxable person 29

(Biz A) in furtherance of business. ACT
Business Transaction VAT Chain
Input VAT refunded via Input

Tax credit line. 30
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EU Transactions
EXPORT
Countries
Outside of
IMPORT EU
EU Member
DOMEST State
IC
Other EU
Countries
ACQUISITIO
N
DISPATCH
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Types of Transactions
Transaction Definition
Supply of Goods The transfer of ownership of tangible
property
Supply of Services Anything that is not a supply of goods.
Services can be subject to the Reverse
Charge mechanism.
Intra-Community acquisition of goods Acquisition of the rights of tangible
property transported to another
member state (eg Fr to Es)
Imports/Exports Entry into the community of goods
which are not in free circulation.
Exit from the community with the
proper level of documentation.
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VAT and Customs Territory
Third territories
Territories in the EU but not part of
the VAT or Customs Territory.
For example, Ceuta is part of

Spain, therefore the EU but not
part of the either territory.
Import duty and import VAT
Part of the customs territory but

not VAT:
Channel Islands
French overseas departments
(Martinique, Guadalope)
No import duty but import VAT
Monaco not EU, but part of EU

VAT and Customs Territory.
No import duty nor import VAT
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Place of Supply
Transaction Place of supply
Supply of Goods Where the goods are located when the
supply takes place. Follows origin
principle.
Article 33
Supply of Services B2C There the supplier is established
B2B - Where the customers business
is established
Imports/Exports Entry into the community of goods
which are not in free circulation
Place of origin or destination based

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Time of Supply rules
Goods
VAT is chargeable when the goods are supplied
Intra-Community supply of Goods

Earlier of the issuance of the invoice or the delivery of the goods.
Supply of services
VAT is chargeable when the service is supplied or if the service is prepaid then its at time
of payment.
Importation of Goods
Provided there are no import duties due, chargeable upon entering the country.
If import duties are due, VAT is chargeable when the customs duties are due.
Importation into a customs warehouse may be exempt of VAT.
There are many exceptions to the general rules
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Partial Exemption
A partially exempt business is one that makes both exempt
and taxable supplies. The issue for a partially exempt
business is how much of their input VAT they may reclaim.
Standard calculation for computing the
Taxable Supplies (excluding VAT)

Total Supplies (excluding VAT) X 100
Expressed as a percentage and rounded up. Is recomputed

annually.
Taxable supplies does include zero rated supplies.
As an example:
If my business has a 70% taxable and Ive purchased Fuel
from Tesco with 15.95 GBP VAT I can reclaim 70% of the
VAT.
Exempt supplies include Insurance,

finance credit, education and training
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Reverse Charge - examples
Under EU VAT Law, the general rule for B2B services is they are taxed
where the customer belongs. Invoicing cross border would then be
charged free of VAT, but the customer must account for the VAT in their
country.
Reverse Charge (Tax Shift) the recipient of the service must act as both
the supplier and customer and account for both Input and Output VAT for
the transaction subject to normal reclaim/partial exemption rules.
On the sale of professional services from a French (FR) business to a
Spanish (ES) business of 1000 Euros net. The ES business would self
assess 200 Euros Output VAT and 200 Euros VAT Input VAT in the same
month yielding a net 0 due to the tax Authorities.
100 % reclaim 50% reclaim (partial exemption)
200 Output VAT 200 Output VAT
200 less Input VAT (100% reclaim) 100 less Input VAT (100% reclaim)
0 Tax Due 100 Tax Due
In Spain, failure to reverse charge could lead to penalty up to 150% of the VAT
even if no tax was due the tax authorities. Other country apply different rules.
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Registration
For VAT purposes, a taxable person is any individual, partnership,
company which supplies taxable goods and services in the course of
business.
However, if the annual turnover of this person is less than a certain limit
(the threshold), which differs according to the Member State, the person
does not have to charge VAT on their sales.
VAT Registration process and VAT reporting differ from country to country.
Spain has no threshold but the UK threshold is 73,000 GBP annually.
A business does not have to have an establishment in a country in order
to be required to register. Sales activity could trigger a registration
requirement.
Once registered, a business is provided with a VAT Registration number
and expected to file a periodic VAT return as well as other possible filings.
All the registration rules change frequently. From August 2012, UK
threshold will be removed for businesses not established in the UK.
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Returns
Across the EU, periodic VAT returns are
due on either a monthly, bi-monthly,
quarterly and/or annually. Some
countries (eg Germany, Italy) file returns
on a monthly and annual basis.
In the EU, no two returns are the same
and are typically in local language.
Returns typically match calendar month
unless other arrangements are made with
the tax authorities. UK
Ireland 39
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France
VAT Groups general EU rules
VAT Grouping
Provided for via article 11, this option allows for taxable persons who are
bound to one another by financial, economic and organisational links are
treated as a single taxable person. The supplies between members of a
VAT group are outside the scope of VAT. This only applies domestically.
Advantages:
Simpler VAT Accounting there is only one VAT return for the entire group
Supplies between members are outside the scope of VAT
Exempt entities (entities making purely exempt sales) will now be able reclaim input VAT
Disadvantages:
By including exempt entities it makes the entire group partially exempt reducing the recovery for
all
VAT return preparation can be challenging for large VAT groups if the return is late bigger issue
Joint and several liability for VAT for all group members if one member becomes insolvent
Need to manage the group members
VAT grouping is allowed outside the EU as well,

Australia, New Zealand 40
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EU Declarations
Intrastat
Introduced in 1993 to allow for the collection of statistical information on intra-community trade of goods
including both acquisitions and dispositions. Typical filing includes ICN commodity code, country code,
value in local currency, Delivery terms , Nature of Transaction (XY), Net Mass and Supplementary Units
(optional).
Across the EU, the return is filed either monthly or quarterly and differing thresholds for filing apply. In
addition, some countries require additional fields and specific software to upload the filing (eg Netherlands).
Penalties for late or missing filings may apply.
EC Sales & Purchases

Taxable persons that may intra-community sales must submit the EC Sales list to the VAT Authorities. A
typical filing includes country code, customer VAT Registration number (must be valid), value of the goods,
value of the services.
Across the EU, the return is filed either monthly or quarterly and differing thresholds for filing apply. In
addition, some countries require additional fields and specific software to upload the filing. France requires
a combined Intrastat and EC Sales Listing report.
Penalties for late or missing filings may apply.
UK return and reconciliation

Box 8 and 9 are the Intrastat Arrivals and Dispatches respectively. The Monthly Intrastat transactions
should reconcile to these boxes on either the Monthly or Quarterly VAT Returns.
Italy
Italy recently introduced a new annual communication list including all supplies to black listed countries.
This is an annual filing due 30 April for the proceeding calendar period.
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Assessments, Penalties etc
General process
Control visit visit from a Tax Authority
Examination of records
Assessments
Appeals
UK
Reasonable care when do penalties apply?
Penalties will apply when a return contains a careless inaccuracy or a deliberate inaccuracy.
Three categories of offences failure to take reasonable care:
Careless action
Deliberate but not concealed
Deliberate and concealed Penalty applies to tax
Reason Penalty Unprompted Prompted

disclosure disclosure
Careless 30% 0% 15%
Deliberate but not concealed 70% 20% 50%
Deliberate but concealed 100% 30% 15%
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An unprompted disclosure is when the taxpayer has no reason to believe Jeff Hilt/Theresa Pardee
HMRC are about to discover the error ACT
UK - Senior Accounting Officer
Certificate
The SAO of a qualifying company must provide HMRC with a certificate stating whether
the company has appropriate tax accounting arrangements or, where it does not,
providing an explanation.
The certificate should be provided to the CRM (HMRC Client Relationship Mgr) for the
company or companies covered and the suggested format for the certificate is as follows:
-
I.. as Senior Accounting Officer of the qualifying company /companies listed below,
hereby certify that to the best of my knowledge and belief throughout the companys or
companies financial year ended [.] the company/companies had appropriate accounting
arrangements or to the extent it/they did not an explanation is provided below.
Penalty Provisions
There could be a penalty of 5000 assessable on the SAO if they fail to comply with the main
duty
there could be a penalty of 5000, again assessable on the SAO, if they fail to provide a
certificate or if they provide an incorrect certificate; or
there could be a penalty where a company fails to notify HMRC of the name/s of the person who
was the SAO throughout the financial year
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How to measure risk?
Annual and/or periodic surveys measuring risk
VAT Under Management
Annual review of business processes
Working closely with the tax authorities
More real time metrics KPIs
Data Analytics
Data Mining
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Sales & Use Tax
Types of Sales/Use Tax
Sales Tax:
A Sales Tax is a tax imposed on receipts from sales by
the supplier on taxable intrastate transactions.
Sellers Use Tax:
A Sellers Use Tax is a tax imposed on receipts from
sales that is collected by the supplier on taxable
interstate transactions
Consumers Use Tax:
A Consumers Use Tax is a tax that is imposed on
tangible personal property brought into a state for
storage, use, or consumption in the state when the seller
did not collect seller's use tax on the sale of the property.
Other names for common sales taxes include: Privilege tax,

License Tax, Gross Receipts Tax
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Importance of Sales and Use Tax
Percentage of Total State Tax Collections by
Category, 2010
Source: U.S. Census Bureau, 2010 State Government Tax Collections

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State Sales/Use Tax
Today, 45 states, the District of Columbia and Puerto

Rico impose some form of sales and use tax.
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States with NO Sales Tax
New Hampshire
Oregon
Montana
Alaska
Delaware
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Local Sales/Use Taxes
Over 6,700 Jurisdictions Have Local Sales/Use Taxes

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General Concepts
Sales Tax Generally a flat rate tax imposed
on the gross receipts derived from or the
sales price of retail sales of tangible
personal property or taxable services
Regressive tax
Discrete event
Transfer of possession/performance
of taxable service
Consideration
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General Concepts
Sales Tax - Four types of sales tax
Privilege tax imposed on the seller for

privilege of selling tangible personal property
within a jurisdiction
Consumer levy imposed on the buyer, but
is a debt to the seller who is required to
collect
Transaction tax imposed on the sale of
TPP or taxable services and may be a debt
to the seller
Gross Receipts tax assessed on the gross
receipts of a business in a state 53
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General Concepts
Sales Tax
Characteristics of all four sales taxes
Everything taxable unless exempt by statute
Everyone taxable unless exempt by statute
All receipts taxable unless excluded by
statute
Only transactions defined by statute as
occurring with a state are subject to the tax of
that state
Services taxable by exclusion in all but gross
receipts states
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What is a Sales Tax?
Imposed on Retail Sales

Includes Leases
Tangible Personal Property (TPP)
Property that can be perceived by the senses
(touched, felt, seen, etc.)
For Consideration
Cash or Promissory Note
Assumption of Debt
Barter of Goods or Services
Imposed on Final Consumer

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What is a Use Tax?
Imposed on Use, Storage, or

Consumption of Tangible Personal
Property (TPP)
All states with a sales tax have a use tax
Complimentary to sales tax
Generally imposed on owner of property
for the right to store, use or consume
property in a state
Imposed on Final Consumer

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Common Taxable Services Related
to Tangible Personal Property
Assembly
Fabrication
Installation
Repair & Maintenance
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Enumerated Services
These are services which are listed in the

statute as taxable services.
Enumerating services allows a taxing authority
to move beyond the definition of TPP for
additional ability to tax.
Many states are broadening the list of enumerated

services to increase revenue.
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Activities Involving No Transfer of
Property, but Enumerated As
Taxable
Mostly Commonly:
Admissions to amusements
Club fees and dues
Memberships
Telecommunication &
Services
Cable & Satellite television
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Business Services Subject to Tax
Data Processing
Debt Collection
Information
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Sales Tax Nexus
The term nexus is used in tax law to describe a situation in
which a business has a "nexus" or presence in a state and
is thus subject to sales taxes for sales within that state.
Physical Presence
Property location (e.g., sales office, warehouse)
Employees
Agents
Representatives
Independent contractors
Having nexus for sales tax purposes means you are

required to register, collect and remit the tax.
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Is the Seller Required to Collect?
Pennsylvania
Texas
NOT IF:
Mail Order
Advertisement
1-800 Telephone #s
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Pennsylvania
Texas Yes If:

Sales solicitation by
employees, representatives,
& independent contractors
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Pennsylvania
Texas
Yes If:
Owning/leasing
property
Maintaining an office
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Situs
Sale of Tangible Personal Property
Origin based on sellers place of
business
Destination shipping address
May require additional details such as
location of order acceptance or order
origin.
Sale of Services
Where performed
Where benefit received
Determination of tax jurisdiction is based upon the situs of the

transaction.
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Amounts Included in Sales Tax
Measure
Entire Selling Price of
taxable Tangible Personal
Property (TPP) including
fabrication or assembly labor
prior to sale, and may
include freight & installation.
Entire selling price of taxable

services
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Amounts Not Included in Sales Tax
Measure
Separately Stated Services
Separately Stated Repair or Installation Labor
Shipping or Transportation After the Sale
Cash Discounts
Interest and Finance Charges
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Use Tax Measure
Material Cost:
Actual cost of materials only
Full Retail or Fair Market

Value
Full price including profit
margin
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What is an Exemption?
A transaction that is within the general scope of the
tax statutes, but is the subject of special provisions
removing it from taxation is subject to an exemption.
Common Examples:
Exemptions based on type of buyer (charities,
govt.)
Type of item purchased (e.g., food, medicine)
Certain uses (manufacturing, goods to be resold)
A valid exemption certificate relieves the seller of

the obligation to collect or remit the tax.
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Contents of a Valid Exemption
Certificate
Name and Address of Customer
Sellers Permit or Registration Number of
Purchaser
Name of Seller
Description of Business of Purchaser
Description of Property Being Purchased
Date (On or Before Date of Sale)
Signature of Authorized Representative
Statutory Reference to Exemption being Claimed
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Sales Tax Rates Changes, 2009
In 2009, there were 707 Sales Tax Rate Changes

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Average Sales/Use Tax Rates, 2010
State 5.5%
County 1.5%
City 1.6%
District .9%
Combined 9.5%
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Tax Return Filing Process
Filed on a monthly basis.

Due dates: 15th, 20th, 25th, and End of the
Month.
File with state and local taxing authorities
Over 6,700 taxing locations. Source: ADP,
Inc.
File electronically
System is cumbersome, inefficient and expensive

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Tax Integration with Business
Processes
What is tax automation?
Determining tax rules, tax amounts, rates, and reporting codes

based on input variables in the ERP
The level of sophistication of the automated solution can vary
greatly based on available technology and business tax
process
The three most common approaches:
Native ERP Tax Engine (e.g. Oracle tax code defaults)
Custom Developed Solution decision tables (e.g. Old
SSS VAT soln or Energy Parts ERP IC soln)
External Tax Engine Interface (e.g. Sabrix, Vertex,
Taxware, etc.)
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Buy to Pay Tax Overview
Oracle Tax Engine Oracl
e
1.0 2.0 3.0 4.0
5.0 6.0
Enter Retrieve Determine Apply
Classify Account
Supplier Invoice Tax Tolerance
Lines for Tax
Invoice Data Liability s
Data passed to tax engine Buyer & Compare Tax Code Custom
as part of invoice Seller Sabrix Tax to allocated at line Account
validations Locations Supplier Tax level Generator - tax
Validations run on a 3 Transaction accounting
Tolerance
hour cycle Type based on rules
determined at
Only transactions that at LE level
Product OU level
pass all standard Oracle Exceptions Accounting
validations are selected Short Pay
for each for Tax
ability
applicable
determined at
jurisdiction(s
OU level
) are
evaluated
Check For
Exemption
Certificates
Apply rates &
rules at
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invoice line Jeff Hilt/Theresa Pardee
level ACT
SSS L2 Process Map
L2 SSS Sabrix AP Tax Process
SSS AP Data
o Invoice Validation Request Set

1.2
Entry
1.1
Enter Non-PO o GESSS Paygroup Assignment
Enter PO Invoice
Invoice
o GE 170 Invoice Dummy Creation
o Invoice Validation
o Sabrix Set Tax Status Flag
SSS AP Automated Validations
Oracle o Sabrix PrePopulate & PreValidate

2.1 Standard Validation
Run Standard Validations N Hold o Sabrix AP Tax Process
Validations Complete? Assigned
o Markview Approval Check Event
Invoice Y
o Invoice Approval Workflow
Validation
Sabrix Tax Sabrix Pre-
2.2
Status Flag Sabrix Validation
Run Sabrix Pre-
Updated to Validations N Hold
Validate &
R Complete? Assigned
Populate
Set Sabrix Tax Sabrix PrePopulate

Status Flag & PreValidate
Y
Sabrix AP Tax Process
2.3 Invoice
4.0 Tax Code 6.0
Execute Sabrix Tax Is In 5.0 Valid CCID for Processed
Apply Sabrix Tax Y Created in Y Perform Custom Y
Tax Process Pre- Tolerance? Classify Tax Lines Tax Line? Successfully
Tolerances Oracle? Accounting
Calculation
Sabrix AP Tax N N N
Process
Sabrix Tax
Sabrix Tax
Tolerance
Account Hold
Hold
Assigned
N Assigned
Sabrix Tax
Engine
Sabrix Tax
Process Error
3.0 Severity 2 Tax
Y Hold
Calculate Tax Error?
Assigned
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Buy to Pay Process

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Order to Cash Process Flow
Oracle Modules and Tax Engine and interface to Oracle AR
Interface to Tax Engine Oracle AR
2.0 3.0
1.0 4.0 5.0 6.0
Retrieve Determine
Generate Generate Account Generate
Invoice Tax
Billing Tax Code for Tax Reports
Data Liability
Data is interfaced from Customer Exemption Supply Location Custom Account

order and field service Locations (Ship Buyer Generator - tax
modules. From, Ship To) Primary/Seller accounting based on rules
Data passed to tax engine Primary at LE level
Transaction ID
as part of auto invoicing Excluded EU
Amount Accounting for Tax
or as part of manual Provinces
invoice process. Date of Transaction Reporting
EU Movement
Legal Entity Lookup
Type
Tax Category
Intercompany
(Product and
Transaction
Transaction Type)
Type
Point of Title transfer
and Delivery Terms

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Order To Cash Process

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Key Design Challenges - Goods
Importer of
Ship From Not
Record What Tax Category for
Always Captured
data element in Materials
in ERP
ERP?
ERP Terminology Item Master Data
Vendor Direct
vs. GE T&CS Structure
Non-standard Intrastat
Interco
Incoterms Classifications
Manual AR Manual AR Manual AR

Invoices Invoices Invoices
Services Modules Services Modules Services Modules
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Key Design Challenges - Services
Address
Elements Not Legal Entity Tax Category for
Captured in ERP Structure Services
Modules
Separately Stated
Seller Address
Oracle Multi-Org vs. Lump Sum
Place of Cross Border

Performance Legal Entity vs. Service Types
Branch (e.g.
GEII) Outside Scope or
Installation Site
Exempt
Commissionaire Progress Billing

Repair Shops
or Advance Pmts
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Comparison between VAT & Sales
and Use Taxes
Summary: VAT versus Sales/Use
Sales/Use
Description VAT
Tax
A multistage tax collected at
every stage of the production
A single-stage tax collected at the
Operation of Tax process; widens the number of
entities collecting and remitting
final sale to consumer.
the tax.
Entities collecting and remitting

Collection & the tax do not have to verify the
Entity collecting and remitting the
tax needs to verify the status of
status of the customer as either a
Remittance business or final consumer.
the customer.
Tax is calculated based on the

Computation of value added at each stage of
Tax is calculated based on the
total value (sales price) paid by
Tax production. the final consumer.
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Sales/Use
Description VAT
Tax
Tax base is generally limited to

A broad-based tax; almost all
sale of tangible personal
Tax Base sales are taxable, including
sales of service.
property; only enumerated
services are taxable.
Entities may recover the VAT Certain intermediate

they paid on any intermediate transaction are exempt; others
transaction (input tax credit); are subject to the tax.
Transaction Based tax cascading may be Potential tax cascading effect
minimized. However, over may occur on previously paid
taxation may result if the input tax.
tax chain is broken.
85
ACT
Sales/Use
Description VAT
Tax
Exclusion from RST simply

Exempt from VAT means the
means that the transaction is
entity would not impose VAT
outside the scope of the tax.
Exemption and would not be entitled to
input tax credit for VAT paid on
The taxpayer has no burden of
proving that the transaction is
its purchase.
excluded.
Exemption from RST means

Zero rating means that the the transaction is within the
entity would impose VAT but at scope of the tax but is
Zero Rating a rate of zero and would be specifically listed as exempt
from tax. Burden of proving
entitled to input tax credit for
VAT paid on its purchase. that the transaction is exempt
rests on the taxpayer.
86
ACT
Sales/Use
Description VAT
Tax
Entities need to
Entities need to
distinguish sales that are
Taxability taxable, exempt, or zero
distinguish sales that are
either taxable or exempt.
rated.
Exemption certificates
Use of invoice to self-
may not effectively
Documentation enforce the tax; harder to
police the use of
evade.
exemptions.
May require refunds if Refunds are generally

Refunds inputs exceed outputs. limited to overpayment
of tax.
87
ACT

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VAT & Sales/Use

Jeff Hilt & Theresa Pardee

What could be harmonized?

Swindon - mini-roundabouts were invented by Frank 22

27 Member States not including Norway and

Supply Goods or services. Services defined as

Tesco Output VAT

Biz A Input VAT

Petrol purchased by a taxable person 29

Input VAT refunded via Input

For example, Ceuta is part of

Part of the customs territory but

Monaco not EU, but part of EU

Place of origin or destination based

Intra-Community supply of Goods

There are many exceptions to the general rules

Standard calculation for computing the

Taxable Supplies (excluding VAT)

Expressed as a percentage and rounded up. Is recomputed

Taxable supplies does include zero rated supplies.

Exempt supplies include Insurance,

VAT grouping is allowed outside the EU as well,

EC Sales & Purchases

UK return and reconciliation

Reason Penalty Unprompted Prompted

Deliberate but not concealed 70% 20% 50%

Deliberate but concealed 100% 30% 15%

Other names for common sales taxes include: Privilege tax,

Source: U.S. Census Bureau, 2010 State Government Tax Collections

Today, 45 states, the District of Columbia and Puerto

Over 6,700 Jurisdictions Have Local Sales/Use Taxes

Privilege tax imposed on the seller for

Imposed on Retail Sales

Imposed on Final Consumer

Imposed on Use, Storage, or

Imposed on Final Consumer

These are services which are listed in the

Many states are broadening the list of enumerated

Having nexus for sales tax purposes means you are

Texas Yes If:

Determination of tax jurisdiction is based upon the situs of the

Entire selling price of taxable

Full Retail or Fair Market

A valid exemption certificate relieves the seller of

In 2009, there were 707 Sales Tax Rate Changes

Filed on a monthly basis.

System is cumbersome, inefficient and expensive

Determining tax rules, tax amounts, rates, and reporting codes

o Invoice Validation Request Set

Oracle o Sabrix PrePopulate & PreValidate

Set Sabrix Tax Sabrix PrePopulate

Jeff Hilt/Theresa Pardee

Data is interfaced from Customer Exemption Supply Location Custom Account

Jeff Hilt/Theresa Pardee

Jeff Hilt/Theresa Pardee

Manual AR Manual AR Manual AR

Services Modules Services Modules Services Modules

Place of Cross Border

Commissionaire Progress Billing

Entities collecting and remitting

Tax is calculated based on the

Tax base is generally limited to

Entities may recover the VAT Certain intermediate