Are you a member of your company's tax department or SAP implementation team? Perhaps you are a tax consultant working in an SAP environment or an SAP professional charged with tax responsibilities. If so, this comprehensive reference will quickly become your most trusted guide, as it walks you, step-by-step, through the entire process of integrating your systems with SAP. Based on SAP ERP 6.0, this book delivers a practical overview of U.S. taxation, from an SAP perspective. It teaches you how to use SAP to streamline your tax preparation and reporting, illustrates the value of SAP Master Data, and much more.

This hands-on book also features detailed coverage of all aspects of an SAP system affected by tax issues, including Financials, SD, and MM, as well as Project Systems, and even Asset Management. In addition, you'll explore the ins and outs of the invaluable SAP DART tool, uncover SAP's powerful controls, and find out how best to use external tax tools. Financial auditors and IRS auditors will also find this book highly useful in solving complex SAP and U.S. tax-related issues.

Finally, readers have a resource to help maximize the vast capabilities of SAP in order to handle the ever increasing complexities of U.S. tax issues, thus addressing the unique challenges that arise in situations where these two areas converge.

Highlights

• Federal taxes
• State and local taxes
• Master Data issues
• Payroll issues
• Benefits issues
• Record retention
• Income tax issues
• DART tool
• Tax configuration

About the Author(s)

Michael Scott is a Certified Public Accountant, a Certified Management Accountant, and an SAP consultant. He has also trained IRS agents from the Computer Audit Specialist (CAS) program. A regular presenter at national ASUG conferences, Michael has taught accounting at the college-level.

Table of Contents

1 ... Introduction ... 23
... 1.1 ... What Is Tax Integration? ... 24
... 1.2 ... The Tax Integration Process ... 25
... 1.3 ... Understanding Your SAP Team ... 28
... 1.4 ... Implementation Teams ... 29
... 1.5 ... Phases of an SAP Implementation ... 31
... 1.6 ... SAP Solution Manager and Its Role in Project Management ... 32
... 1.7 ... Summary ... 34

2 ... Overview of Taxation in the United States ... 37
... 2.1 ... Federal Income Taxes ... 38
... 2.2 ... State and Local Income Taxes ... 43
... 2.3 ... Sales and Use Taxes ... 44
... 2.4 ... Property Taxes ... 46
... 2.5 ... Payroll and Benefit Taxes ... 47
... 2.6 ... Other Taxes ... 48
... 2.7 ... International Taxation ... 48
... 2.8 ... Record Retention Issues ... 48
... 2.9 ... Summary ... 50

3 ... Impact of Organizational Structure on Tax ... 51
... 3.1 ... The Use of Company Codes in SAP ... 51
... 3.2 ... The Role of SAP Revenue and Cost Objects ... 59
... 3.3 ... Summary ... 67

4 ... Federal, State, and Local Income Tax Integration ... 69
... 4.1 ... Chart of Accounts ... 69
... 4.2 ... Fixed Assets ... 71
... 4.3 ... Intercompany Transactions ... 81
... 4.4 ... International Tax Considerations ... 83
... 4.5 ... Summary ... 84

5 ... Tax Withholding and Reporting ... 85
... 5.1 ... Classic Withholding versus Extended Withholding ... 85
... 5.2 ... 1099 Withholding and Reporting ... 88
... 5.3 ... 1042 (NRA) Withholding and Reporting ... 90
... 5.4 ... Configuration of Extended Withholding ... 91
... 5.5 ... Summary ... 95

6 ... DART and Record Retention for Tax Departments ... 97
... 6.1 ... DART ... 98
... 6.2 ... Implementing DART ... 100
... 6.3 ... Unstructured Record Retention for Tax ... 119
... 6.4 ... Summary ... 121

7 ... Payroll and Payroll Taxes ... 123
... 7.1 ... Payroll Tax Compliance ... 124
... 7.2 ... Tax Reporter ... 125
... 7.3 ... Tax Uses of Payroll Data ... 127
... 7.4 ... Payroll Tax Audits ... 128
... 7.5 ... Summary ... 129

8 ... Master Data ... 131
... 8.1 ... The Company Code Master ... 131
... 8.2 ... The Plant Master ... 134
... 8.3 ... The Storage Location Master ... 135
... 8.4 ... The Asset Master ... 136
... 8.5 ... The Material Master ... 137
... 8.6 ... The General Ledger Master ... 138
... 8.7 ... The Customer Master ... 139
... 8.8 ... The Vendor Master ... 140
... 8.9 ... The Cost Center Master ... 142
... 8.10 ... The Internal Order Master ... 143
... 8.11 ... The Project/WBS Master ... 145
... 8.12 ... Master Data Cleansing ... 146
... 8.13 ... Loading Master Data ... 147
... 8.14 ... Summary ... 148

9 ... Tax Reporting ... 149
... 9.1 ... SAP Standard Reports ... 150
... 9.2 ... SAP Query, Report Painter, and Report Writer ... 152
... 9.3 ... Functional Specifications for Reports ... 155
... 9.4 ... Summary ... 156

10 ... Other Income Tax Topics ... 157
... 10.1 ... Third-Party Income Tax Compliance Systems ... 157
... 10.2 ... Section 199 — The Domestic Production Activities Deduction ... 158
... 10.3 ... Travel and Entertainment Expenses ... 165
... 10.4 ... Apportionment ... 169
... 10.5 ... R&D Tax Credits ... 172
... 10.6 ... FAS 109, FAS 123R, and Other Accounting Issues ... 174
... 10.7 ... Summary ... 176

11 ... Property Tax ... 177
... 11.1 ... Asset Cost Buildup ... 177
... 11.2 ... External Property Tax Software ... 181
... 11.3 ... Summary ... 185

12 ... Calculating Sales and Use Tax Within the SAP System ... 187
... 12.1 ... The Sales and Use Tax Calculation ... 187
... 12.2 ... Tax Procedures and the Condition Technique ... 188
... 12.3 ... Overview of Tax Tools in An SAP System ... 190
... 12.4 ... U.S. Tax Procedures ... 201
... 12.5 ... Sales and Use Tax Analysis ... 207
... 12.6 ... Summary ... 208

13 ... Calculating Sales and Use Tax Using External Tax Software ... 209
... 13.1 ... Strengths And Weaknesses of TAXUSX ... 209
... 13.2 ... Configuring the Communication Link Between R/3 or ECC and External Tax Software ... 211
... 13.3 ... Building the Logic Matrix Within the External Software System ... 225
... 13.4 ... Summary ... 226

14 ... Tax Configuration in the SAP System ... 227
... 14.1 ... Assigning a Tax Procedure to a Country ... 228
... 14.2 ... Configuration Steps Unique to TAXUSX ... 229
... 14.3 ... Defining the Structure of the Tax Jurisdiction Code ... 231
... 14.4 ... Master Data Configuration and Master Data in SD ... 231
... 14.5 ... Master Data Configuration and Master Data in MM ... 236
... 14.6 ... Maintaining Tax Codes ... 243
... 14.7 ... Nontaxable Transactions ... 247
... 14.8 ... G/L Account Maintenance ... 247
... 14.9 ... A Final Word About Sales and Use Tax Configuration ... 249
... 14.10 ... Summary ... 249

15 ... Miscellaneous Taxes ... 251
... 15.1 ... Franchise Taxes ... 252
... 15.2 ... Beverage Taxes and Bottle and Can Deposits ... 254
... 15.3 ... Waste Taxes and Environmental Fees ... 258
... 15.4 ... Summary ... 259

16 ... Transfer Pricing ... 261
... 16.1 ... The SAP Solution to Transfer Pricing Issues ... 262
... 16.2 ... Transfer Pricing for Tax ... 266
... 16.3 ... Summary ... 269
... 16.4 ... Book Summary ... 269

A ... Suggested Tax Accounts ... 273

B ... Asset Classes and Depreciation Areas ... 277

C ... DART Team Application Process ... 281

D ... DART Transaction Codes for DART Release 2.4 ... 285

E ... DART Administrator Role ... 287

F ... Suggested Payroll Data Elements ... 289

G ... Data Requirements for Intercompany Transaction Analysis ... 293
G.1 ... Legal Entity Profit and Loss Reports in U.S. GAAP ... 293
G.2 ... Legal Entity Balance Sheet Reports in U.S. GAAP Cash ... 294

H ... IRS Tax Forms ... 297
H.1 ... Tax Forms for Chapter 1 ... 297
H.2 ... Tax Forms for Chapter 4 ... 302
H.3 ... Tax Forms for Chapter 5 ... 331
H.4 ... Tax Forms for Chapter 7 ... 334
H.5 ... Tax Forms for Chapter 10 ... 344
H.6 ... Tax Forms for Chapter 11 ... 347
H.7 ... Tax Forms for Chapter 12 ... 348

I ... Glossary ... 349

J ... About the Author ... 353

Index ... 355