Taxation & Compliance

Status: INTERIM (AS-BUILT partial; cross-service tax canon and policy enforcement are TARGET). Current services capture tax fields as documented per service.

Purpose

Define cross-service tax rules so sales and wholesale flows apply the right taxes by jurisdiction, facility, and channel, with full auditability.

Core principles

• Taxes are jurisdiction-aware and time-based; rates can change and are effective-dated.
• Tax basis is explicit: tax-included or tax-added (exclusive) is captured per channel and policy.
• Tax-on-tax rules are explicit and ordered; no tax-on-tax defaults apply unless configured.
• Tax exemptions are first-class, with customer-specific exemptions and certificate validity windows.
• Tax rules are auditable: every tax calculation preserves the basis, rates, and exemptions used.

Global reference plane (tax canon)

• Canonical jurisdiction references (country, state/province, city, district) with versioned rule sets.
• Tax types: sales tax, VAT/GST/HST, luxury tax, excise duties, environmental fees.
• Rate tables with effective windows and jurisdiction scope.
• Tax-on-tax ordering rules by jurisdiction (when applicable).
• Thresholds and product-type rules where mandated (for example luxury thresholds).
• Non-taxable classifications and exceptions where mandated by law (for example, children's apparel/footwear exemptions or reduced rates with size/age/price thresholds).

Initial rollout jurisdictions

• Canada
• United States
• Australia
• New Zealand
• Ireland
• Caribbean nations

Org overlays (policy and eligibility)

• Org defines nexus presence and applicable jurisdictions.
• Org maps products to tax categories (global tax codes) and taxability flags.
• Org configures tax basis (included vs added) by channel and facility.
• Org configures rounding rules and calculation granularity (line vs order).
• Org configures exemptions and tax holidays with eligibility rules.
• Org may configure jurisdiction-specific overrides where regulations allow.

As-built surfaces (current)

• SCM: /scm/tax/policy/get|list|set, /scm/tax/quote, /scm/tax/finalize.
• CRM: /crm/exemption/certificate/create|get|list, /crm/exemption/certificate/status/set.
• Accounting: export create supports export_kind=tax_audit with optional tax filters; tax fields are ingested into financial events for audit exports.

Facility and jurisdiction awareness

• Each logical facility has jurisdiction context used for origin-based rules.
• Destination jurisdiction is derived from customer delivery address or pickup rules.
• Channel policy chooses origin-based or destination-based taxation per jurisdiction.
• Cross-border and DTC scenarios are supported with explicit applicability rules.

Exemptions and exceptions

• Customer-level exemptions (reseller, nonprofit, government) with certificate IDs and expiry.
• Product-level exemptions (tax-exempt categories) based on tax codes.
• Child-specific exemptions or reduced rates where mandated, with eligibility tied to product attributes (age/size/price thresholds).
• Channel-level exemptions (for example DTC-only exemptions where permitted).
• Exemptions are auditable and reversible if certificates expire.

Child-goods eligibility examples

Business-level examples (no jurisdiction specifics):

• Size-based eligibility (youth vs adult size ranges).
• Age labeling or intended-use attributes captured in product metadata.
• Per-item price ceilings or thresholds.
• Category scoping (apparel, footwear, essentials) with explicit exclusions.
• Bundles: apply exemption only to eligible line items.

Tax calculation outputs (business)

• Tax basis (included vs added) is recorded per line and per order.
• Tax type, rate, jurisdiction, and effective rule set are recorded.
• Tax-on-tax order and exclusion rules are recorded when applicable.
• Tax rounding method is recorded for audit and dispute resolution.

Taxable base definition

• Taxable base (list vs net, discount treatment, loyalty redemptions, gift cards) is defined by policy and recorded on every tax event.
• If discounts or coupons are applied, the taxable base reflects the policy for that channel and jurisdiction.
• Tax-on-fee decisions (shipping, service fees, surcharges) are explicitly configured and recorded.

Policy versioning and audit anchors

• Every tax policy is versioned and effective-dated with a reason code.
• Every tax event preserves the policy version, basis, jurisdiction scope, and exemption references used.
• Overrides (emergency or exception) are captured separately with approver and rationale.

Operational guardrails (business)

• Policy changes use a preview window before becoming effective for active channels.
• Freeze windows can be applied for peak periods to reduce operational risk.
• Exemption audits flag expired certificates and require resolution before continued use.
• Tax holidays are defined with explicit eligibility windows; out-of-window transactions are not retroactively altered.

Failure posture (business)

• Tax determination is mandatory for order finalization; unresolved taxes hold the transaction for review.
• Non-binding quotes may include an estimate, but must be clearly flagged as an estimate and recorded as such.

Policy hierarchy and precedence (business)

• Global tax canon defines jurisdiction rules and tax categories.
• Org overlays define nexus, basis, rounding, exemptions, and guardrails for overrides.
• Facility or channel policy can narrow applicability within org guardrails.
• Transaction-level exceptions require approvals and reason codes; they never replace the underlying policy record.

Taxability classification and bundles (business)

• Products map to global tax categories; classification changes are versioned and non-retroactive.
• Bundles/kits allocate taxable base across components by policy (for example list-price proportion) while preserving per-item taxability and exemptions.
• Gift cards, store credits, and service fees rely on explicit taxability flags rather than assumptions.

Tax timing and liability events (business)

• Liability trigger is explicit per jurisdiction/channel: order capture, invoice issuance, or shipment completion.
• Partial shipments/fulfillments compute tax on fulfilled quantities and preserve policy versions for pending lines.
• Tax-included pricing back-calculates tax amounts using the recorded basis and rounding policy.

Overrides and approvals (business)

• Manual tax overrides require explicit role approval and reason codes.
• Overrides are captured as adjustments and never mutate the underlying policy record.

Audit package (business)

• Each tax event can be exported with inputs, policy version, jurisdiction chain, rates, tax-on-tax order, taxable base allocation, exemption references, and line-level outcomes.

Jurisdiction setup checklist (business-level)

Each jurisdiction must be configured with explicit, effective-dated policy. This is a readiness checklist (not implementation detail).

• Jurisdiction identity: official code, effective window, and parent/child hierarchy.
• Tax types: sales tax, VAT/GST/HST, luxury, excise, environmental fees, and any required surcharges.
• Tax basis: included vs added, and whether basis differs by channel or facility.
• Tax-on-tax ordering: explicit order and exclusions when multiple taxes apply.
• Threshold rules: price or quantity thresholds that change applicability or rates.
• Product categories: mappings for taxable, reduced-rate, and exempt categories.
• Child-goods eligibility: explicit parameterized rules (size/age/price/intent) tied to product metadata.
• Customer exemptions: eligibility classes, certificate requirements, expiry handling, and audit capture.
• Origin/destination rules: when origin-based or destination-based tax applies.
• Shipping/fees taxability: whether freight, service fees, or surcharges are taxable.
• Returns/adjustments: reversal rules must reference original tax basis/rates and exemptions.
• Rounding and proration: line vs order rounding, and proration rules for partial refunds.

Jurisdiction readiness tracker (template)

Use this tracker to record readiness status per initial rollout region. Fill details using the checklist above.

Jurisdiction	Status	Checklist owner	Notes
Canada	Ready to configure	Org tax admin	Use global tax canon + org overlays; jurisdiction data sourced externally.
United States	Ready to configure	Org tax admin	Use global tax canon + org overlays; jurisdiction data sourced externally.
Australia	Ready to configure	Org tax admin	Use global tax canon + org overlays; jurisdiction data sourced externally.
New Zealand	Ready to configure	Org tax admin	Use global tax canon + org overlays; jurisdiction data sourced externally.
Ireland	Ready to configure	Org tax admin	Use global tax canon + org overlays; jurisdiction data sourced externally.
Caribbean nations	Ready to configure	Org tax admin	Use global tax canon + org overlays; jurisdiction data sourced externally.

Returns and adjustments

• Returns reverse tax using the original tax basis and rate set.
• Adjustments are recorded as new tax events with references.
• Partial refunds preserve tax proration rules.

Performance requirements

• Tax determination must be near-instant for checkout and quote flows.
• Bulk operations (invoices, exports) must be efficient for high-volume orgs.

Relationships and data flow

• PVM stores product tax categories and taxability flags.
• PPM provides tax basis flags (included vs added) for price resolution.
• SCM calculates taxes for sales and returns using global rules plus org overlays.
• CRM stores customer exemption profiles and certificates.
• Accounting exports tax events by jurisdiction and tax type.

Related pages

• Request context: /common/request-context.html
• Roles & governance: /common/roles-governance.html
• Eventing & auditability: /common/eventing-auditability.html
• Accounting readiness: /story/accounting.html