Use the Tax Groups window to group multiple, conditional taxes. Tax groups let countries with multiple taxes automatically calculate each applicable tax within Receivables and Oracle Order Management. For example, Canada has two types of taxes: Goods and Services Tax (GST) and Provincial Sales Tax (PST). GST is a federal sales tax that is applied for all shipments, and has one standard tax rate. PST is applied at the provincial level and has a different tax rate for each province. Similarly, India has multiple taxes, both government and state sales tax applies, and the state tax rate is controlled by the ship–to address.
When you implement VAT and Canadian Tax, you should assign tax codes or tax groups at the Customer and/or Item Levels.

Compound Tax
Tax groups support compounded tax rates within the group.
Compound tax enables you to calculate multiple taxes for a transaction.

To compound tax, specify an order of precedence for each tax code in the group. Once set up, Receivables automatically calculates the compounding of multiple taxes within the group when you assign it to a transaction.
Tax groups can also contain multiple independent branches of compounded tax. Within each compounding branch, Receivables adds tax to the original amount, so each subsequent tax line within the branch calculates tax on the new taxable amount. Receivables then adds the tax for each compounding branch to determine the total tax amount.

Attention: A compounding branch within a Tax Group can contain either inclusive or exclusive tax codes, but not both.
Additionally, only one compounding branch in a Tax Group can have inclusive tax codes.

Note: Tax groups consisting of tax inclusive tax codes cannot contain some tax codes with a Taxable Basis of After Discount
and some with a Taxable Basis of Before Discount.

Inclusive Tax
Inclusive tax codes include the tax for a transaction line in the line amount, rather than displaying these amounts separately. Certain restrictions apply when using inclusive tax codes in compounding branches of a Tax Group.
Note: If you override a tax code, Receivables preserves the override across all updates to the invoice. Similarly, changing
the ship–to address or the line item could change the default tax code.