The Tax State is the foundation of the taxing function. Since each state is free to determine the taxes that will be levied to its residents, each state will be represented by an individual Tax State. And since each state is likely to be further broken down into individual municipalities with different local tax laws, we have created the concept of a Tax Jurisdiction.
A Tax Jurisdiction represents an arbitrary geographic location as denoted by the state, county, city, and ZIP code information. A County Tax Jurisdiction requires both the state and county information, whereas a Local Tax Jurisdiction requires the state, county, and city information. If necessary, the ZIP code information can be used to further distinguish two different Tax Jurisdictions. Each Tax State may have one or more Tax Jurisdictions, including the state.
As new customers are added, each is assigned to a Tax State and Tax Jurisdiction. These assignments determine the taxes levied against a customer's charges during the billing operation. With the Tax State and Tax Jurisdictions set up, the individual taxes must be created and assigned to each entity as established by the applicable tax laws. Both the Tax State and Tax Jurisdictions may have many taxes.
Each individual tax includes a tax percentage rate and other characteristics which control how the tax is levied against the usage-based (services tolls) and non-usage based services. There are five different types of taxes: Federal, State, County, City, and Regional. These types will restrict the user's ability to assign a tax to the Tax State and Tax Jurisdictions. For example a Federal Tax can only be assigned to the Federal Tax State, whereas a State Tax can only be assigned to a Tax State. And as you would expect, the same restrictions apply to the County and City taxes. The Federal, State, County, and City taxes can only be assigned to a single Tax State. As a general rule, you need not be too concerned with these type designations or restrictions as the Tax Management application is responsible for maintaining and controlling these assignments.
Although the Federal Tax (FE) is listed in the All States column, taxes assigned to the Federal Tax State are charged to all customers within the U.S.