Some items are subject to tax, others not. For example, items used in repairs are generally taxable. If the item is capitalized or it is used in a product that is sold, then it may be tax exempt. The rules can vary between countries or states and tax rules can change at any time. 

There are Tax Exempt fields in the following applications:

  • Companies and Company Master includes a field with a domain for the tax exempt code (1,2,3) and a field to record the Tax Exempt Number provided by the vendor’s country or state.
  • A check box in Item Master, Service Items and Tools, additionally in the Item/Organization Details and the Vendors table window.
  • A check box in Purchase Requisition, Purchase Order and Invoices on the PR, PO and Invoice lines.

Companies

The Tax Exempt Code and Number in the Companies and Company Master applications existed prior to the Tax Exempt check boxes in the other applications which were introduced in Maximo 7.5. I do not believe the two are linked. The Tax Exempt Code in the Companies application has a Select Value lookup as follows:

  • 1 – Exempt
  • 2 – Not Exempt
  • 3 – Exempt Resale

They do not exist anywhere other than in the Companies and Company Master applications

Item Master

The Tax Exempt check boxes in the ITEM, ITEMORGINFO and INVVENDOR tables are very much linked.

In Item Master, Service Items or Tools application if you change the Tax Exempt check box at the Item level you get the message “BMXAA7831I – Do you want to apply the tax-exempt status to the organization level for the item, and to the vendor level for the item?” Answering Yes will also change the setting for all Organizations belonging to the same Item Set and all vendors linked to the item.

The setting which is made in Item/Organization Details is also used as a default when you insert a new vendor record against the item for the same organization. Changing the setting in Item/Organization Details dialog has no effect on existing vendor records for the item.

Organizations – System Setting

In the Organizations application under the System Settings action there is a check box for “Apply Tax-exempt Status to Item at Organization Level and at Vendor Level?”. This has an effect when loading item data through the integration framework rather than through the user interface, as the message we saw previously controls the rolldown within the application screens.

Purchase Requisitions and Purchase Orders

On the Purchase Requisition Lines the “Tax Exempt?” check box is derived from the Item-Vendor (INVVENDOR) record if the vendor is referenced on the purchase requisition header. It can be modified, but you might want to restrict who can perform this, perhaps the commodity buyer who should be aware of what is tax exempt and what not.

If the Purchase Requisition does not reference a company or the No Vendor field is checked then the “Tax Exempt?” setting on the PR line is derived from the setting at the Item/Organization Details for the item and organization.

On a Purchase Order created from a Purchase Requisition the “Tax Exempt?” setting is copied from the associated PR line. However, new lines added to the purchase order follow the same logic as for a purchase requisition, it will take the setting from the INVVENDOR record if there is a reference to the same vendor on the PO, otherwise it will take the setting from the ITEMORGINFO record for the item and organization. Again the “Tax Exempt?” field can be modified on the purchase order line. 

On PR and PO lines a change to the “Tax Exempt” field from 0 to 1 will blank out all the tax code fields and make them read-only, the tax values will also be blanked. A change of the “Tax Exempt” field from 1 to 0 will apply the appropriate tax codes and the tax amounts will be recalculated. 

When entering a tax code if you get the message “BMXAA0019I – The Tax Code field is either read only or part of the primary key. You cannot edit this field.” it might be because the PR or PO line is marked as tax exempt. It does not stop you from entering a value in the tax code field.

Invoices

On the Invoices application and invoice lines the “Tax Exempt?” setting is derived from the associated PO line. In the above picture for the same item I had marked line 1 as not exempt and there is tax of 0.45. For line 2 I had marked the PO line as tax exempt and its tax is therefore 0.00.

On the second invoice line I have changed the “Tax Exempt?” field to be unchecked and the tax has been calculated as for invoice line 1.

The “Tax Exempt?” field is enabled for a Service line or a Standard Service line. For Standard Services the “Tax Exempt?” setting is derived from the Item Vendor (INVVENDOR) field, or if no record found for the vendor of the invoice then it will be taken from the Service Items/Organization Details table (ITEMORGINFO).