In SAP the Tax Code Determination Setup window is used to set how you want a tax to work on a Global level. For example:

Example 1: You could use Tax Code Determination Setup to say that you always want to charge sales tax to customers in California, but never charge sales tax to anyone outside of California. This might be the case if you had an online store which requires you to charge sales tax in the state your businesses is in, but not other states.

Example 2: If you are a tax exempt non-profit company, you could use the Tax Code Determination Setup to tell SAP that you never need to pay sales tax for items that you purchase.

 

To access the Tax Code Determination window:

Navigate to: Modules Tab > Administration > Setup > Financials > Tax > Tax Code Determination

Navigate to Tax Code Determination Setup in SAP

The Tax Code Determination screen will pop up:

Tax Code Determination Setup in SAP