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At the end of this lesson, you will be able to:

Discuss the highlights of SAP ERP Country Version USA Financials

Find related information and details about SAP Country Version USA Financials

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This country version is designed for use by businesses with operations in the

United States. As well as the generic SAP system functions, the country version

comprises functions designed for laws and business practices particular to the

United States, along with a country template to help you customize the system

according to local requirements.

This e-book explains how the country-specific functions work. It does not cover the

generic SAP ERP functions, which are described, for example, in the SAP Library.

The most important country-specific functions for the United States, related to

Financials, are as follows:

Sales and use tax

Withholding tax, including reporting

Asset accounting

Bank accounting, including check management

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Lets start with a short overview of this country version.

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The country version for USA financials has been available in the SAP ERP

standard for a long time.

Although SAP ranks this country version as medium complexity, the frequency of

legal changes is dynamic; in other words, you must be prepared to apply legal

changes quite often and this procedure must be part of your ERP maintenance

planning. SAP offers appropriate information about legal changes in the SAP

Service Marketplace. You can also subscribe to be informed of changes ahead of

time.

The interpretation of law text is difficult. You have to check carefully to find out if

new laws are applicable for your company.

The official language is English, and SAP delivers a full translation of the SAP

ERP system.

If you are also using other languages, please make sure that your system is

Unicode-based.

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Lets start with the largest chapter taxes in the United States.

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Most states in the United States impose a sales tax on sales of goods. As a

general rule, the consumer bears the tax and the vendor merely acts as a collector

for the jurisdiction. Most jurisdictions that impose sales tax also impose a

complimentary use tax on the use or consumption of goods originating from

another state. Transactions are generally subject to sales or use tax, but not both,

and payment is generally self-imposed by the buyer or seller.

Sales tax is levied on the sale of taxable goods and is imposed by the tax

authorities on transactions that occur within a state. No sales tax is imposed for

transactions originating outside the state when the seller is not present in that

state.

If you are a seller in an intrastate transaction, you must collect and remit sales tax

to the tax authorities. If you are a purchaser in an intrastate transaction, the

vendor must collect sales tax from you and remit it to the tax authorities.

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You can configure the SAP system to automate calculation and posting of sales

and use tax. When you post a document, the system automatically determines the

sales and use tax amounts and assigns the amounts to the appropriate accounts

or retains the information for reporting.

Generally, there is an exemption from use tax for goods purchased for resale or

production material.

If you purchase and consume goods from another state, the vendor does not

charge tax on the invoice. Therefore, you are required to remit use tax to your

local tax authority. If you sell goods to a purchaser in another state, you do not

charge sales tax. The purchaser is required to remit use tax to the tax authority

where the goods are consumed.

SAP offers various methods to compute sales and use tax.

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Self-assessment tax is a common practice for large corporations who take

responsibility for accruing taxes for all sales and purchases, both intrastate and

interstate.

To be able to calculate self-assessment tax, a company must hold either a Direct

Pay Permit or a similar exemption certificate.

States that allow Direct Pay Permit issue exemption certificates to a company. In

turn, the company communicates their exemption status to their vendors.

In our example (see figure) Company 1 is a Direct Pay Permit holder and notifies

the vendor, Company 3, of this status. When Company 3 sells products to

Company 1, it does not charge tax on the transaction. Instead, Company 1

accrues taxes on the transaction and remits the taxes to the tax authorities.

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When you create a company code using the template for the United States, the

system automatically creates three calculation procedures:

TAXUS, which is seldom used, is based on tax codes, but not jurisdiction codes (non-

jurisdiction method).

TAXUSJ is based on a tax jurisdiction method with tax codes (jurisdiction method).

TAXUSX is used in combination with third-party tax calculation packages (for example,

TAXWARE International, Vertex, or Sabrix).

Once you choose your method, with or without jurisdiction codes, it is difficult to

switch to another. SAP recommends that you use an external tax calculation

system to avoid time-consuming manual data entry.

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When you create a company code using the template for the United States, the

system sets up sample tax codes for the calculation procedures TAXUSJ and

TAXUSX.

You can either use the tax codes provided or create your own using the provided

codes as samples, as show here.

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In the United States, the taxation authorities impose more than 55,000 tax

jurisdiction codes. Each jurisdiction is identified by a tax jurisdiction code. The tax

jurisdiction code is a key. Together with the tax code and other parameters, the

jurisdiction code determines the tax amount and the way in which payment of the

entire tax amount is divided between the tax authorities.

If you use the tax calculation method with jurisdictions, you have two options to

calculate taxes:

Using calculation procedure TAXUSJ, you manually enter the required jurisdiction codes and

enter the corresponding tax percentages.

Using calculation procedure TAXUSX, you calculate taxes in an external system that contains

jurisdiction codes and their corresponding percentages.

Jurisdiction codes are defined for key master records. For sales transactions, the

tax code depends on the customer data, such as location and the type of material.

For purchasing transactions, the code depends only on the material.

In a sales transaction, the ship-to location determines the jurisdiction code. In a

purchasing transaction, the location where consumption occurs determines the

jurisdiction code.

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The system automatically determines the amount of tax and how the tax is

distributed among jurisdictions. Several factors influence tax determination,

including the origin and destination of goods and the material or customer

taxability.

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In the United States, invoice recipients are sometimes required to collect

withholding tax on behalf of certain vendors, such as self-employed people or non-

resident foreigners.

Normally, however, invoice recipients only need to report withholding taxes, and

do not have to collect and pay the taxes. In this case, the vendor is liable for

paying the tax amount to the Internal Revenue Service (IRS).

Withholding tax amounts must be reported to the IRS at regular intervals, and a

statement is sent periodically to the vendor. The corresponding forms are shown

here.

If you withhold taxes at both state and federal level, SAP recommends that you

use the extended withholding tax functions.

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A taxpayer identification number (TIN) uniquely identifies recipients whose income

is connected with a United States trade or business.

You must submit the taxpayer identification number with your tax returns. If you do

not know the recipient's number, you can request it from the IRS using Form W-9,

Request for Taxpayer Identification Number and Certification. With this form, you

can also certify that the furnished number is correct.

You maintain the taxpayer identification number in the customer and vendor

master data. If it is a social security number, you maintain it in the Tax Number 1

field. If it is a corporate identification, you maintain it in the Tax Number 2 field.

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The DME Engine enables you to define file formats that meet the requirements of

your financial institution by modeling an externally defined (bank) format in the

ERP system. This allows you to send or receive data in the form of DME files.

To submit annual statements of withholding tax amounts to the Internal Revenue

Service (IRS), you can print the required forms or generate DME (*) files for all

withholding tax reporting supported by the system (1099-MISC, 1099-G, 1099-INT,

and 1042S) using the Generic Withholding Tax Reporting program. In addition,

there are a few individual programs to print other forms, for example, 1099 Misc

Reporting or 1042S Reporting for foreign vendors.

The ability to define these formats in the ERP system is particularly important

because there is no worldwide or regional standard format. In some cases, no

country standard exists and the file must comply with bank-specific standards. It is

difficult for standard software to cover such numerous and varied local format

requirements, but the DME Engine enables you to define your particular local

format yourselfwithout any ABAP programming knowledge or coding.

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The standard system comes with all the appropriate Smart Forms, SAP Interactive

Forms, and DMEE format trees, as show here.

If you are required to report 1099 or 1042 payments, SAP recommends that you

use the extended withholding tax solution, but the classic withholding tax solution

supports United States requirements as well.

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Two special topics have to be considered in regard to accounts payable and

accounts receivable.

The Minority indicator, which is a field in the vendor master record that determines

the minority group to which the vendor belongs, it is only relevant in the United

States and is only used for reporting purposes.

The Cancellation of Debt functionality, also known as 1099-C , is another

important topic. According to United States law, any money-lending institution is

required to report to the IRS each cancellation of debt of $600 or more for each

debtor. The following organizations, for example, must submit 1099-C:

Financial institutions

Credit unions

Federal government agencies

Federal Deposit Insurance Corporation

Credit card companies

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In the United States, you use chart of accounts CANA. CANA is delivered with the

standard ERP system and is also valid for Canada. Every account supplied in

CANA contains six digits.

Financial Statements, like the balance sheet and profit and loss statement, must

be prepared according to certain guidelines. You can use sample reports that are

pre-customized in SAP ERP. For example, see the sample reports in the SAP

Library, including 0F1: Reports of 0F-BSNA (balance sheet) and 0F-PLNA (profit

and loss statement).

You can run the sample reports with leading report 0FNA.

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In the United states, you prepare your profit and loss statement using the cost of

sales accounting method, which matches the sales for the reporting period to the

production costs of these sales.

In the ERP system, you assign your periodic operational expenses to functional

areas (such as production, administration, and sales and distribution). Expenses

and sales that are not assigned to functional areas are directly transferred to the

profit and loss statement.

The system determines a functional area for certain expenses (for example,

retrieved from the master record of the GL account, cost center, or the cost center

category).

You can also directly enter the functional area when posting. The ERP system is

delivered with pre-customized settings, including sample functional areas, cost

center data, and so on. You can use these settings as a template for your own

configuration.

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A series of reports is available to meet the specific reporting needs of Asset

Accounting in the United States.

Certain tax laws (known as mid-quarter convention) in the United States require

you to calculate depreciation on the basis of half-periods. When the fiscal year

version in the FI General Ledger corresponds to the calendar year (12 periods),

you can meet this requirement without using a different fiscal year variant in Asset

Accounting.

You can learn more about standard depreciation areas in the SAP Help Portal at

help.sap.com.

In the United States, the Capital Lease Procedure applies. Businesses are legally

required to capitalize leased assets under certain circumstances. The system

provides comprehensive functions for this purpose (in Germany, this is known as

Aktivierungspflicht).

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Finally, well take a look at Bank Accounting for the United States.

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Checks are a common payment method in the United States. In the ERP system,

the check management functionality helps you to manage both pre-numbered

checks and checks with allocated numbers from your own number ranges. You

can print checks according to United States standards with SAP script form

F110_PRENUM_CHCK.

Lockbox is a service offered by banks in which banks collect and process

customer payments to reduce processing time. The ERP system can handle both

lockbox file formats offered by banks, namely, BAI and BAI2.

A company can create lockbox accounts at its bank (or banks). These accounts

act as payment collection accounts for customer payments. The company then

informs their customers that all open item payments for their accounts must be

submitted to one of the established lockbox accounts. The bank collects these

payments, along with the customers remittance information, which indicates what open items the customer payment is intended to clear. Data entry clerks at the

bank manually enter the information into an electronic file for transmission to the

company that owns the lockbox account. These files are typically transferred

nightly to the various lockbox owners (companies).

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The files adhere to one of two standard banking industry transmission formats

(BAI and BAI2), both of which are supported in the system.

BAI and BAI2 formats differ in their level of information detail. BAI does not

separate the incoming check line items by invoice subtotal reference. Conversely,

BAI2 splits the check total into separate invoice references and associated

payment amounts. As a result, your hit rate percentage of payment-invoice matching from each transmission is likely to be higher when using BAI2.

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You should now be able to:

Discuss the highlights of SAP ERP Country Version USA Financials

Find related information and details about SAP Country Version USA Financials

26

For more information on the topics discussed in this lesson, see the references listed

here.

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Thank you!

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