Standard Tax Calculation Engine

Important If your use case includes testing or simple tax calculation, you can use Salesforce Billing’s internal tax tables, which include basic rates and requirements. These internal tables are not intended to replace full-scale tax engines. Due to the complexity of rules, addresses, and remittance requirements for taxation, we recommend using a third-party tax integration. The Standard Tax Engine is built only to handle testing or basic calculation needs.

Like any other type of tax engine, the Standard Tax Engine calculates tax by using a tax integration, tax rule, tax treatment, and tax rate. When an order product is invoiced, Salesforce Billing checks its tax rule to see whether it’s taxable. Salesforce Billing then matches the order product to a tax treatment with a matching legal entity. To use the Standard Tax Engine, your treatment’s Tax Integration field must look up to a Standard Tax Engine tax integration record.

The tax rate object, which looks up to a legal entity, defines the percentage value used to calculate tax on order products and invoice lines. Upon order product creation, Salesforce Billing evaluates the order product’s tax treatment. If the treatment and a tax rate have matching legal entities, Salesforce Billing then evaluates the treatment and rate’s tax code. If both values match, Salesforce Billing applies the tax rate to the order product. For example, if an order product had a subtotal of $1000 and a matching tax rate had a 10% rate, the order product has an estimated tax of $100.

During invoice line creation, Salesforce Billing makes the same evaluation using the invoice line’s tax treatment and a tax rate. The result of the calculation is sent to the invoice line’s Tax field and used to calculate the invoice line’s Total Amount (With Tax) field.

Salesforce Billing allows a company to integrate with multiple tax engines, which can be segmented to apply the correct tax engine calculation when key requirements are met. Third-party tax reporting is more robust and can ensure compliance with tax laws and that taxes payable are in balance.

Example To describe the standalone use of the Standard Tax Engine, we’ll use a sample company called Local Containers.

Local Containers utilizes Salesforce CPQ and Salesforce Billing. They are a smaller business, with their entire customer base operating from a single country with VAT taxation. Rates are defined at a national level; national rates are static and don’t change often.

If a credit and rebill occurs after the rate has changed, Local Containers can reinvoice at the original tax rate. Reporting requirements for tax require insight into the total amount of VAT charged in their country. Reconciling tax reports out of Salesforce against information in the company's financial management system ensures that their taxes payable are in balance.

Next, let’s review the use of the Standard Tax Engine with a third-party integration. Local Containers has expanded their business to the United States, in addition to their country of origin. Due to company expansion, and the complex nature of tax in the U.S., Universal Containers requires more robust tax calculation services. They’ll continue to use standard tax for their local VAT tax calculation, however, they also need to integrate with a third-party provider. The third party provides updated rates for appropriate jurisdictions, as tax laws change. This rate management reduces risk and complexity.

• Setting Up a Standard Tax Integration
  To configure a standard tax integration, define a default tax address in Salesforce Billing package settings. Then create tax rates and tax codes, and associate the code with a tax treatment. (Salesforce Billing Managed Package)
• Considerations for the Standard Tax Engine
  Before you start working with the Standard Tax Engine, review important considerations. (Salesforce Billing Managed Package)
• Guidelines for the Standard Tax Engine
  When you’re working with the Salesforce Billing standard tax engine, consider key guidelines. (Salesforce Billing Managed Package)
• Comparing CPQ Tax and Billing Tax
  Salesforce CPQ calculates tax on the quote object, while Salesforce Billing calculates tax on the order and invoice objects. Review this and other important differences when comparing the tax calculation processes between Salesforce CPQ and Salesforce Billing. (Salesforce Billing Managed Package)
• Configure an External Tax Integration
  Create a tax configuration to handle communication between Salesforce Billing and an external tax-calculation service. (Salesforce Billing Managed Package)