Tax Code Defaulting

Maximo is set up to allow 5 tax types, which means in tables like PRLINE or POLINE there are 5 tax code fields and 5 tax amount fields for storing the calculated tax after applying the tax rate associated with the tax code. The tax types equate to which of the tax fields are being calculated. Tax is normally calculated for the first tax type, a TAX1CODE is entered and the TAX1 amount is calculated. The second tax type applies TAX2CODE and calculates the TAX2 amount, but there are options on whether it should include the TAX1 amount before applying the tax rate. There can be up to 27 tax types by making a change in Database Configuration application, Tax Types – Add/Modify Tax Types.

This article is focused on how tax codes are defaulted around Maximo rather than the setting up of tax types and their tax codes which is performed in the Organizations application – Purchasing Options – Tax Options. But that is where we will start first.

Organizations – Tax Options

The Tax Code Hierarchy determines the order in which Maximo searches tables to derive an appropriate tax code to apply in the Purchase Requisition, Purchase Order and Invoice applications on their PR, PO and Invoice lines. It will use the tax codes from:

Organizations – Addresses

In the Organizations application and Addresses tab only the first tax type field is displayed (TAX1CODE). I have set it to be MA which has a tax rate of 5%.

On the Item/Organization Details dialog there is a Tax Code field (TAX1CODE), but it also has the 5 other tax code fields in the table, the 5th is TAX5CODE. I have left the Tax Code field blank.


The Companies application also has the 5 tax type fields with the first showing as the field Tax Code (TAX1CODE). Company ATI also has a MA tax code for tax type 1. The “Pay Tax to Vendor” field should be checked if you expect to receive an invoice from the vendor that includes tax. There are no tax fields on the Company Master application and COMPMASTER table.

Item Master – Vendors

When I add vendor ATI to item 11001 in the Item Master application in the Vendors tab, the Tax Code (TAX1CODE) in the INVVENDOR table is defaulted from the companies record for ATI, it is set to MA. The Tax Exempt setting has been defaulted from the Item/Organization Details. There is no logic to say if it is Tax Exempt then there is no need for tax codes, this is logical because this data will only be used for defaulting onto other records, for example a purchase requisition, so it will be fine if the “Tax Exempt?” setting takes priority there.

Purchase Requisitions – With vendor

In the following test on Purchase Requisitions I will start with a vendor ALLISON that has no tax code set up at either Companies or Item-Vendor levels. There is no tax code at Item/Organization Details for item 11001.

For a new Purchase Requisition the Ship To field is set to BEDFORDMAIN which has the TAX1CODE of MA at 5%. As soon as you go to enter a new row on the purchase requisition lines the tax codes will be defaulted from the Ship To Address tax codes, before even entering an item.

If I change the vendor on the PR to ALMAR which has a different tax code, one of NJ, when I create a PR line with the New Row button it makes no difference, it is still being defaulted from the tax codes on the Ship To address.

If I remove the tax code on the BEDFORDMAIN address in Organizations application and then use the New Row button on the PR line, the tax code is set to NJ being derived from the COMPANIES record for vendor ALMAR.

User – Personal Information

Incidentally, the users Profile – Personal Information provides the Ship to Address.

Item Master – Vendors

In the next test we will add ALMAR to item 11001 but with a different tax code.

ALMAR now has a tax code of PA for item 11001. Now when we create a new row on the purchase requisition it defaults to the tax codes from the ALMAR companies record (NJ), but then when we enter item 11001 it changes to PA. The tax code on the Item/Vendor record has taken preference over that from the company record.

Item Master – Item/Organization Details

In the final test we will add a tax code at the Item/Organization level.

For item 11001 and EAGLENA organization we have added a Tax Code of NH. When using New Row button on our purchase requisition and entering item 11001 it made no difference the tax code was still derived from the Item-Vendor record for ALMAR, a tax code of PA.

Purchase Requisitions – No vendor

We have now marked the purchase requisition as No Vendor and entered our item 11001 and the tax code was blank – panic !! – not what I expected. The tax code can’t be derived from the Companies record or the Item/Vendor record because there is no vendor on the purchase requisition. But look carefully, EAGLENA is marked as Tax Exempt and if you had read the article on that subject you would know that it is defaulted onto the purchase requisition line and when it does this it blanks the tax codes and tax amounts.

If you look carefully, when removing the “Tax Exempt?” check (right hand column), then for item 11001 the Tax Code in the Quantity and Costs section is now derived from the Item/Organization record, a tax code of NH.         

Purchase Orders

To recap then, Maximo is using the Tax Code Hierarchy defined in the Tax Options to search for a tax code to apply for each tax type field. It is looking in this order:

  1. Ship To Address
  2. Item/Vendor
  3. Company
  4. Item/Organization

On a Purchase Order we have a ship to address on the header in the Ship To / Bill To tab, but we also have a Ship To field on the PO line in the Delivery Details section. The reason for this is that a purchase order can link to multiple purchase requisitions which can have different ship to addresses. 

I created two approved Purchase Requisitions for different sites with two different ship to addresses. On the Purchase Order application when you use the action Copy PR lines to PO and select the two purchase requisitions the appropriate ship to address is added to each line and the tax code is calculated from these addresses, and not from the vendor on the PO. 

When you add a new PO line the Ship To address on the PO line is defaulted from that on the PO header and the tax codes are defaulted from this address. I did find that if you change on the PO line the Site and Ship To address after an Item had been entered that it did not use this Ship To address to recalculate the tax codes, I suspect that this is something that should be corrected. The test was performed on Maximo


In the Invoices application the tax codes on the invoice lines are copied from the purchase order lines. If you enter a new service line on the invoice the tax code defaults from the company on the invoice. If you change the new service line to point to a PO line it uses the tax codes from that PO line. If you enter a standard service then it is deriving the tax code from Item/Vendor, Company and Item/Organization in that order. There is no Ship To Address on an invoice line and hence cannot use this to derive a tax code.

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