Taxability Mapping Made Simple-(ish)

Taxability mapping is one of those detailed tasks that will never make the headlines in any annual report, but it is fundamental to indirect tax processes. 

Understanding what’s taxable in any given jurisdiction, and which products and services require special treatment, calls for a methodical approach. That’s precisely what the taxability mapping capabilities in Vertex deliver, automating much of this highly detailed work for you.

Taxability categories are groups of similar goods and services. The Vertex category architecture consists of three elements: General, which includes services such as computer software services as well as tangible personal property and digital goods; Manufacturing, for inputs directly associated with production; and Qualifying Conditions, covering items such as environmental fees and 
non-production mechanical and electrical (M&E) expenses in manufacturing.

Taxability category “trees” further refine the categories with additional branches. For example, Services branch into Computer Software Services, which branch into Music Delivered Electronically. This helps you select the appropriate taxability category for your business. We also recommend our Taxability Analysis report to help you decide which Vertex-defined category fits the tax rules that apply in a given jurisdiction.

You can also create a custom user-defined taxability category. Check the Vertex categories carefully first, though, because you’ll need to do your own maintaining and updating of any user-defined categories.

Category mapping is accomplished in the Vertex O Series as part of the initial implementation of the software. The taxability categories are updated through monthly data updates, ensuring that you always have a more accurate view and an automated response to the constantly changing sales and use tax landscape.

Blog Author

Larry Mellon, Tax Directory, Vertex Inc

Larry Mellon

Tax Director, Chief Tax Office

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Larry Mellon is a Tax Director in the Chief Tax Office, where he is responsible for providing insights, thought leadership and customer-centric direction to Vertex functional groups, supporting the continued expansion of Vertex indirect tax solutions and overall enterprise strategy. He has over 30 years of experience in sales and use tax compliance, risk assessment, jurisdictional audits, administration and management, as well as VAT compliance. Larry joined Vertex in 2005 as a Sales and Income Tax Supervisor and has served as Tax Manager since 2012, where he has played a pivotal role in elevating and advancing the company’s tax management offerings.

Prior to joining Vertex, Larry served as a Senior Tax Accountant and Property Tax Manager at Foamex International, Inc., a polyurethane and advanced polymer foam product manufacturer and marketer. Mellon also held multiple roles at The Franklin Mint and is a member of the Institute of Professionals in Taxation (IPT) and Tax Executives Institute (TEI).

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