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Allocated charges

Use allocated charges improves the accuracy of your tax liabilities by adjusting how a shared charge (like freight) is taxed.
In some states, taxes on freight or shipping charges are based on the taxability of all items in the invoice, excluding the allocated charges. In these cases, Determination uses the effective tax rate for the invoice to calculate a basis percentage, which gets applied to each allocated charge line. You can include multiple allocated charges on a single invoice.
For example, consider a situation where the price for each line item varies as does its taxability. Assume that fur coats are taxed at the state's standard rate of 7%, while the t-shirts are exempt from tax. An invoice total of $210 consists of $180 in furs (taxable goods), $20 in t-shirts (exempt goods), and $10 for shipping. Since the state requires freight to be an allocated charge, the resulting tax calculation is 90%, or $9.00, of the original $10 shipping charge.
note
Related charges and allocated charges can't be used in the same transaction. Including a related line number in a transaction excludes any allocation charge rule from applying to that transaction. Allocated charge rules get delivered as part of the standard U.S. tax content.

This article applies to:

  • Product: ONESOURCE Determination,ONESOURCE Indirect Tax