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Administrator Guide
Last Updated: 2026-03-13
Setup Considerations: Transaction Taxes

Setup Considerations: Transaction Taxes

You can use this topic to help make decisions when planning your configuration and use of transaction taxes. It explains:
  • Why to set them up.
  • How they fit into the rest of Workday.
  • Downstream impacts and cross-product interactions.
  • Security requirements and business process configurations.
  • Questions and limitations to consider before implementation.
Refer to detailed task instructions for full configuration details.

What They Are

You can configure Workday to report on the taxes that you pay, self-assess, or collect when you purchase or sell goods and services.
To populate the tax details and calculate the tax amounts on your transactions, you can use either:
  • Workday.
  • A third-party tax integration, for customer or supplier invoices.

Business Benefits

Workday:
  • Populates the tax attributes on your transaction lines based on the tax configuration, minimizing errors and streamlining your compliance with tax authority regulations.
  • Calculates the amount of tax that you pay, self-assess, or collect on your transaction lines based on the tax rates and line amounts, minimizing your manual effort in assessing taxes.
  • Allocates the tax amounts to your spend lines or creates separate journal lines for tax, streamlining your tax accounting and reporting.

Use Cases

  • You can configure Workday to populate the tax attributes on your spend or purchase transactions based on the other attributes of your transactions.
  • Accounts payable specialists can configure tax attributes as they create purchase transactions like supplier invoices.
  • Accounts receivable specialists can configure tax attributes as they create revenue transactions like customer invoices.
  • Employees can select the tax codes on expense lines as they create expense reports. Workday calculates the amount of tax from the expense total, based on the tax code.
  • Expense partners can review the expense reports and override the tax attributes.
  • Tax managers can:
    • Run reports to review and reconcile transaction taxes.
    • Correct transaction taxes.

Questions to Consider

Question
Considerations
Do you use a third-party service to calculate taxes on your transactions?
You can set up a third-party tax integration to populate the tax details on your customer or supplier invoices. Third-party tax integrations enable you to use Workday's accounting and reporting framework, without the need to maintain the tax configurations in Workday.
To which jurisdictions do you pay or report taxes, and what currency do they use?
You can configure multiple tax authorities that:
  • Represent the jurisdictions to which you pay or report on taxes.
  • Drive the tax reporting currency of your tax rates.
What tax rates do you pay or collect?
You can:
  • Configure the individual tax rates that your tax authorities assess. Examples: British Columbia provincial sales tax (PST), Canada goods and services tax (GST), Germany standard value-added tax (VAT).
  • Configure tax categories for tax rates that share common attributes. Examples: Withholding tax, sales tax, or VAT.
Which tax rates or combinations of tax rates apply to your transaction lines?
You can configure tax codes that combine 1 or more tax rates, so you only need to select 1 tax code on each transaction line.
Example: You configure a tax code for British Columbia that combines the PST and the GST tax rates.
Do you reclaim or offset a percentage of the taxes that you pay to your suppliers or tax authorities?
You can configure tax applicability and recoverability codes to:
  • Indicate whether to calculate tax on a transaction line.
  • Populate the tax recoverabilities for each tax code on your transaction lines.
  • Reclaim or offset a percentage of the tax amount for a given tax code on a transaction line.
  • Allocate the nonrecoverable portion of tax to your spend lines or to a separate ledger account.
You can use tax recoverability and applicability in your account posting rules.
Workday always considers tax on these documents as nonrecoverable:
  • Ad hoc bank deposits.
  • Cash sales.
  • Customer invoices.
On a spend transaction line, do you pay tax to the supplier or to the tax authority?
For each tax code on a spend transaction line, you can:
  • Let Workday assess the tax due to the tax authority.
  • Let Workday calculate the tax due to the supplier.
  • Manually enter the tax due to the supplier.

Recommendations

  • To reduce the risk of employees selecting the wrong tax attributes on transactions, configure Workday to automatically populate as many tax attributes as possible. See Setup Considerations: Transaction Tax Rules.
  • To reduce the risk of inaccuracies in your tax reporting, add a tax review step to your business processes on spend and purchase transactions.
  • To record partial self-assessments of tax when suppliers undercharge you tax, create tax-only invoices.

Requirements

Before you can use a third-party tax service to import the tax details on your transactions in Workday:
  • Your third-party tax service provider must deploy the third-party tax integration to your Workday tenant.
    Workday delivers 2 web services that your third-party tax provider can call to get the information they need to calculate tax and to import the results into Workday:
    • Get Taxable Document for Tax Calculation
      .
    • Import Taxable Document Tax Details
      .
  • Add the third-party tax service integration as a step on the
    Customer Invoice
     or
    Supplier Invoice
     business process, following the instructions from your third-party tax service provider.
  • Enable the third-party tax options for your company on the
    Edit Company Tax Details
     task.
  • Your third-party tax service provider must create empty tax rates for Workday to store the tax rate percentages from the third-party service.

Limitations

No impact.

Tenant Setup

You can use the
Edit Tenant Setup - Financials
 task to enable options to:
  • Configure the tax point date on transactions.
  • Populate the tax fields from your tax rules on:
    • Supplier invoices created from supplier invoice requests.
    • Supplier invoices created from a purchase order or supplier contract.
  • Hide the
    Enable Tax
     check box on expense reports when your organization doesn't require tax reporting.
  • Suppress the page alert recommending that you update tax calculations on taxable documents when you don't use Workday for tax calculations.

Security

Domains
Considerations
Set Up: Tax
 domain in the Common Financial Management functional area
Configure transaction taxes.
Reports: Transaction Tax
 domain in these functional areas:
  • Customer Accounts.
  • Common Financial Management.
View transaction tax reports.

Business Processes

No impact.

Reporting

Reports
Considerations
Transaction Tax Detail for Tax on Invoice Transactions
Displays the transaction tax details for the taxable document lines that don't have a
Tax Point Date Type
 of
Payment Date
 at the document line level.
Transaction Tax Detail for Tax on Payment Transactions
Displays the transaction tax details for taxable document lines that have a
Tax Point Date Type
 of
Payment Date
.
Transaction Tax Liability
Calculates the net tax due to each tax authority, which is the collected and self-assessed tax minus the recoverable tax. Displays the tax liability for sales and purchasing transactions.

Integrations

Web Services
Considerations
Get Taxable Document for Tax Calculation
Provides third-party tax services with the tax fields and values that they need to calculate the transaction taxes on your taxable documents.
Import Taxable Document Tax Details
This asynchronous web service enables third-party tax services to import the calculated tax details into Workday.

Connections and Touchpoints

Workday offers a Touchpoints Kit with resources to help you understand configuration relationships in your tenant. Learn more about the Workday Touchpoints Kit on Workday Community.