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.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information. The views and opinions expressed in Tax Matters are those of the authors and do not necessarily reflect the official policy, position, or opinion of Vertex Inc.