In a typical SAP environment, an AP processor has the following options when processing vendor related documents (invoices/credits):

• Option 1: Specify a tax code and select the ‘Calculate Tax’ flag. Enter the gross invoice amount on the vendor line and enter the net line item amount on the GL line. This will cause SAP to automatically calculate the sales/use tax. If the internally calculated tax amount (internal tax amount) is identical to the vendor charged tax amount (external tax amount), the document is in balance and can be posted. In the event of a difference between the internal  and external tax amount, the document will be out of balance and AP processor has the following options:
  • Alter the vendor payment amount (short pay/over pay the vendor) and uncheck the ‘Calculate Tax’ flag
  • Add an additional line item to accrue/expense the tax difference amount
  • Reject the invoice and request a corrected invoice from the vendor
• Option 2: Specify a tax code and un-select the ‘Calculate Tax’ flag. Enter the gross invoice amount and total external tax amount on the vendor line and enter the net line item amount on the GL line. This will cause SAP to post the manually specified external tax amount.
• Option 3: If no tax was charged by the vendor, select the ‘Calculate Tax’ flag and specify a use tax accrual tax code. This will cause SAP to calculate and post the consumer use tax accrual amount

All three options require manual user intervention and, due to the fact that AP processors are typically not tax experts, often lead to over/under payments and accruals of sales and use taxes if the wrong processing option was selected or an incorrect tax code was entered.

Due to the possibility of incorrect tax postings by the AP processors, the tax department typically reviews AP transactions on a periodic basis to validate whether the correct tax amounts have been paid/accrued. These reviews can be extremely time consuming, since they are typically based on either paper copies of the vendor documents or, even if the review is performed online in the SAP system, require the reviewer to look at multiple SAP documents (Purchase Order, Goods Receipt, Invoice Document) to retrieve all of the information that might influence the tax decision (expense account, cost center, order, WBS element, shipping location, material description, material group, etc).

To streamline this review process, DMA has developed the AP Tax Validation Report, which is a custom SAP program that analyzes all procurement activity for a given time period and returns all tax relevant information for each procurement item. The report retrieves this information into an ‘ALV’ grid-display, which allows the reviewer to quickly ‘zoom’ into potential problem areas (e.g. documents posted to a certain account or cost center or documents posted by a certain user or documents above a certain dollar threshold). The report also allows for drill-down into the related SAP documents and associated master records for each line on the report.

Besides the online tax analysis, the report can also be used to extract all tax related information into a downloadable file, which can be used for audit defense purposes in the event the actual document data has been archived of the live SAP system.

Document Selection Criteria: 

• Company Code             
• Document Number          
• Fiscal Year              
• Document type            
• Invoice doc. number      
• Purchasing Document      
• Posting Date             
• Entry date               
• G/L Account No.          
• Vendor                   
• Plant                    
• Region                   
• Material                  
• Material Group           
• Tax Code                 
• Currency                 
• User name                

These are the standard selection criteria. Any data element that is either on the FI document, the Invoice Verification document, the Goods Movement document or the Purchase Order document can easily be added to the list of possible selection parameters.

Report Output: 

The program selects all vendor related documents (LIV invoices/credits as well as FI invoices/credits) and outputs for each document line item the following information in an ALV grid:

• Company Code
• FI Document Number
• FI Document Line Item
• Document Type
• LIV Document Number
• LIV Item Number
• Reference Number (Vendor invoice number)
• Posting Date
• Vendor Number
• Vendor Name
• User-ID of FI Document
• Currency

• Total Invoice Amount incl. Tax (Gross Amount)
• Line Item Net Amount
• Payment Terms
• Due Date
• Quantity
• Unit of Measure
• Tax Jurisdiction Code on FI Line Item
• State of Tax Jurisdiction Code

• Cost Account
• Cost Account Text
• Tax Code on Invoice Document
• Tax Code on PO
• Cost Center
• Internal Order Number
• Controlling Area
• PO Number
• PO Line Item Number
• Plant
• Ship-to Address
• Goods-Receipt Flag
• Material Number
• Material Group
• Material Group Description
• PO Line Item Text

• Posted Line Item Tax Amount
• Posted Line Item State Tax Amount
• Posted Line Item County Tax Amount
• Posted Line Item City Tax Amount
• Posted Line Item Secondary Tax Amount
• Actual Tax Rate for Posted Tax Amount on Invoice
• Actual Tax Rate on PO

For each line item in the ALV grid, the following drill-down options are available:

• FI Document
• LIV Invoice Document
• Purchase Order
• Goods Receipt
• GL Account

• Cost Center/WBS Element/Order
• Vendor

 In addition, the following standard ALV grid operations are available:

• Total/Subtotal
• Filter/Find data
• Sort sequence
• Show/Hide columns
• Define user display variant
• Print

Copyright 2002 TaxAutomation Inc.