Tax Determination in Sales and Distribution: Why Two Countries Appear in Material Master (MM01) and How to Restrict It to One

Why Does MM01 Show Tax Data for Two Countries?

When creating a material master in SAP transaction MM01, you may notice that tax classification data appears for more than one country in the Sales and Distribution (SD) view. This is unexpected if your business is only operating in a single tax jurisdiction.

This occurs due to specific plant and sales organization assignments in your SAP configuration. The country settings are not directly defined in MM01, but are influenced by the way plants are assigned to sales organizations, which in turn link to company codes and their respective countries.

How to Restrict Tax Classification to a Single Country in MM01

To display tax data for only one country in the material master, follow these steps:

1. Review OSS Note 872449 – This note outlines how tax determination works in Sales and Distribution.
2. Understand that tax classification is determined by the Sales Organization and Distribution Channel settings, particularly based on:

  • The plant's country
  • The sales organization's country (via its linked company code)
3. Navigate to transaction OVX6 in SAP:
  • This is where the plant is assigned to the sales organization, distribution channel, and division.
  • The country from the assigned plant determines which countries appear for tax classification in the material master.

Configuration Tips to Maintain Tax for Only One Country

To eliminate the additional country and ensure only one country's tax classification appears:
  • Verify plant-to-sales organization assignment: Ensure your plant is assigned only to a sales organization that belongs to your target country.
  • Check country assignments in the organizational structure: 
    • Plant → Country
    • Company Code → Country
    • Sales Organization → Company Code
  • Adjust or remove any additional configurations that might introduce extra countries inadvertently.
  • After making these changes, you may need to: 
    • Create a new material master to validate the settings.
    • Ensure proper tax category configuration under condition technique.

Key SAP Notes and Resources

  • SAP Note 872449 – Tax Determination in Sales and Distribution
  • Related configurations: OVX6, OVK1 (tax category), OVK3 (tax classification), OX10 (plant setup)

FAQs on Tax Determination in Sales and Distribution

1. Why are two countries appearing for tax classification in MM01?

Because your assigned plant and sales organization may be linked to different countries through configuration.

2. How can I configure SAP to show tax classification for only one country?

Ensure plant and sales organization assignments only reference the desired country.

3. Do I need to recreate the material master after configuration changes?

Yes, it's recommended to create a new material master to reflect the updated tax settings.

4. Can tax classification be manually changed in sales orders?

Yes, it can be adjusted at the item level in SD documents.

5. Is this behavior standard in SAP?

Yes, per SAP’s documentation and OSS notes, this is expected based on configuration.

6. Does this affect tax calculation in billing documents?

Absolutely. Incorrect classification may lead to incorrect tax rates being applied.

See Also
Company's Order To Cash Process

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SAP SD Pricing

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Billing / Shipping

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SAP SD (Sales and Distribution) Configuration Hints and Tips

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