Setting up lane-based taxes and duties

When setting up lane-based taxes and duties, there are three tables specifically used:

• Tax And Duty Regions – Define tax and duty regions which you will apply to sites and customers. This table also defines the Netting Rule and, if needed, an Initial Tax Balance. Refer to Application of the tax costs for additional information. Once you have created Tax And Duty Regions, you apply these in the Sites and Customers tables by populating the Tax Region column. You can also use the Generate Regions feature to create regions based on a column value in Customers and automatically assign the regions.
• Taxes And Duties – Use this table to define specific tax or duty records that apply to a source-destination-product-period combination. You determine whether the tax is based on the source or the destination, then set percentages that determine the actual tax or duty incurred.
• Taxable Value Overrides – You can use this table to override the calculation of the product value for products in a tax region. See Determining product value for additional information.

The per unit refundable tax cost and per unit non-refundable tax costs are calculated in generally the same way. The following shows the non-refundable case:

per unit tax cost = (non-refundable tax base percentage) * (non-refundable tax rate percentage) * (product value)

The Non-Refundable Tax Base Percentage and Non-Refundable Tax Rate Percentage are defined in the Taxes and Duties table.

Application of the tax costs

The per unit tax costs as described by the general equation above are multiplied by the total flow values between the tax regions assigned to the source and destination sites and customers. This calculation results in the total tax cost between those regions.

• For non-refundable tax, total tax cost is added directly to the objective function and as such, becomes an additional cost calculated during optimization.
• For refundable tax, any positive tax balance is added to the objective function as an additional cost for each tax region and period.
• For refundable tax, a tax balance is maintained for each tax region. This formulation is similar to inventory balance:

(balance (current period) = balance (previous period) + flow in - flow out)

You can define the Initial Tax Balance in the Tax And Duty Regions table. By default, the Initial Tax Balance is 0, similar to how Initial Inventory is handled in the Inventory Policies table.

You use the Netting Rule in the Tax and Duty Regions table to determine how negative tax balances are handled:

• End Horizon – This value allows a negative tax balance to be carried over periods.
• End Period – Only positive tax balances are carried over. If the balance goes negative, then it is set to zero in the next period.