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US Localization

What a US company code needs in SAP S/4HANA: US GAAP, sales and use tax by jurisdiction, 1099 and 1042-S reporting, and ACH, wire, check and lockbox payments.

  • US GAAP
  • Sales and use tax
  • 1099 · 1042-S
  • ACH · Wires · Checks · Lockbox

By · Updated

At a glance

Country code
US · USA · +1
Currency
USD ($) · 100 cents
Tax authorities
IRS and the states
Sales tax
State and local · no VAT
Corporate income tax
21% federal + state
Accounting
US GAAP (FASB ASC)
SAP fiscal year variant
K4
SAP tax procedure
TAXUSJ or TAXUSX

Overview

SAP rates the US as a medium-complexity country version with frequent legal changes. There is no federal VAT: the hard part is sales and use tax, set by the states and by thousands of local jurisdictions. The work sits in three areas:

  • Financial accounting

    US GAAP from the FASB Codification, often next to IFRS in a parallel ledger, and separate book and tax depreciation.

  • Tax

    Sales and use tax by jurisdiction code, usually through an external tax engine, and the 1099 and 1042-S information returns.

  • Treasury

    ACH and wires, checks with Positive Pay, lockbox receipts and BAI2 bank statements.

Sales tax, state by state

  • Statewide sales tax
    45 states
  • No statewide sales tax
    Alaska, New Hampshire, Montana, Oregon, Delaware
  • Washington, D.C.
    The capital, a federal district with its own sales tax
Counties, cities and special districts add their own rates on top of the state’s. Alaska has no state sales tax, but its cities and boroughs can levy one.

Currency

US dollar (USD, $), divided into 100 cents. Legal reports and tax payments are in USD; groups add their group currency as usual.

Did you know? The US Mint struck its last circulating penny in November 2025. The cent is still the unit, so USD keeps two decimals in SAP.

Language

English. Executive Order 14224 (March 2025) made it the official language; before that the US had none at federal level.

Did you know? Spanish is the second most spoken language. Install it as a logon language only if users need it.

Complexity, as rated by SAP

Complexity ranking
Medium
Frequency of legal changes
Dynamic
Interpretation of law text
Difficult

What changed recently

US rules move fast. These are the changes that reach an SAP system: tax determination, payment files and the year-end reporting run.

  1. Jun 2018In force

    Economic nexus

    South Dakota v. Wayfair: states can tax remote sellers above a sales threshold.

  2. Mar 2022In force

    Same Day ACH to $1m

    Nacha raised the per-payment limit from $100,000.

  3. Jul 2023In force

    FedNow launches

    The Federal Reserve’s instant payment service, 24/7.

  4. Jul 2025In force

    Wires on ISO 20022

    Fedwire Funds moved to ISO 20022 messages on 14 July.

  5. Nov 2025In force

    Instant up to $10m

    FedNow matched the RTP network’s $10 million limit.

  6. Jan 2026In force

    1099 threshold $2,000

    NEC and MISC, for payments made from 2026; it was $600.

  7. Jan 2027Next

    IRIS only

    FIRE retires: tax year 2026 returns are filed in IRIS.

Financial accounting

US companies report under US GAAP: the FASB Accounting Standards Codification (ASC), the single source of authoritative GAAP since 2009. Companies listed with the SEC file their 10-K and 10-Q under it; only foreign issuers may use IFRS instead.

In SAP: when the parent reports IFRS, the US company keeps US GAAP in a parallel ledger (US groups do the reverse for their foreign companies). Book and tax figures then differ mainly in depreciation, deferred taxes and LIFO.

Did you know? LIFO is allowed under US GAAP but not under IFRS. A company that uses LIFO for tax must also use it in its financial statements (the LIFO conformity rule). SAP covers it in balance sheet valuation.

ASC topics that shape the SAP design
TopicWhat it coversIn SAP
ASC 606Revenue from Contracts with CustomersFive-step model, the same as IFRS 15Revenue Accounting and Reporting
ASC 842LeasesLeases on the balance sheet; operating and finance leasesRE-FX lease contracts
ASC 330InventoryLower of cost and net realizable value; LIFO allowedBalance sheet valuation, LIFO
ASC 830Foreign Currency MattersRemeasurement and translationForeign currency valuation (FAGL_FCV)
ASC 740Income TaxesCurrent and deferred taxesDeferred taxes from book–tax differences
ASC 326Credit Losses (CECL)Expected losses on receivablesAllowance for credit losses on receivables

Sales and use tax

Sales tax is charged by the seller when goods, and in many states services, are sold to the final customer. Use tax is its mirror: when a supplier does not charge sales tax on a taxable purchase, the buyer assesses and pays it.

Rates stack up by jurisdiction (state, county, city and special districts), so the tax depends on where the goods ship from and to, and rates change all the time.

Economic nexus. Since South Dakota v. Wayfair (2018), a state can make out-of-state sellers collect its sales tax once they pass a threshold, typically $100,000 of sales a year. Many states have dropped the old 200-transaction test; Illinois did so on 1 January 2026.

Three ways to calculate it in SAP

  • TAXUS

    No jurisdiction code

    One rate per tax code. Only for very simple cases.

  • TAXUSJ

    Jurisdiction codes in SAP

    SAP calculates from the jurisdictions and rates you maintain, and every rate change is yours to load.

  • TAXUSXUsual choice

    External tax engine

    SAP sends the document to Vertex, Sovos, Thomson Reuters or Wolters Kluwer, which return the jurisdictions, rates and tax.

In SAP S/4HANA the delivered procedures start with 0TX, for example 0TXUSX for the external engine.

Where the jurisdiction code comes from

Ship-from

  • Plant
  • Supplier

Ship-to

  • Customer
  • Plant
  • Cost center
  • Asset
  • Internal order
  • WBS element

The code is filled in when the address is maintained. An asset, order or WBS element without one takes its responsible cost center’s code. Tax can apply at up to six jurisdiction levels.

SAP S/4HANA Cloud

The external engine is reached through the communication scenario for external sales and use tax. The tax partner supplies the integration flow and the BAdIs; messages are monitored in the Application Integration Framework.

  • SAP_COM_0177
  • Manage External Tax Postings (F3085)

Returns are filed state by state, usually from the tax engine’s own register, which SAP keeps up to date. Exemption certificates also live in the engine.

External tax engine, step by step

  1. Define the RFC destination

    TCP/IP connection to the engine’s adapter.

    SM59

  2. Assign the calculation procedure

    Country US → TAXUSX (0TXUSX).

    OBBG

  3. Set the jurisdiction code structure

    The structure the tax engine asks for.

    OBCO

  4. Define number ranges

    For the documents sent to the engine.

  5. Activate external tax calculation

    External system, interface version and RFC destination.

  6. Activate external updating

    So the engine keeps its tax register for returns.

  7. Maintain the tax codes

    Input, output and use tax codes.

    FTXP

  8. Set non-taxable transactions

    Tax code and jurisdiction for postings without tax.

    OBCL

On-premise SAP S/4HANA, under Tax on Sales/Purchases › Basic Settings. The jurisdiction code structure and the tax codes follow the tax engine’s own guide.

Information returns: 1099 and 1042-S

US withholding tax is mostly reporting. A company does not withhold from US suppliers; it tells the IRS, and the supplier, how much it paid them. Tax is withheld only when a US payee has no valid taxpayer ID, and on payments to foreign persons.

  • $2,000

    1099 threshold

    NEC and MISC, for payments made from 2026 ($600 before); indexed from 2027.

  • 24%

    Backup withholding

    When a US payee gives no taxpayer ID, or a wrong one.

  • 30%

    Foreign payees

    On US-source income such as royalties, unless a tax treaty lowers it.

The forms
FormWhat it isWhen
W-9Taxpayer ID from US payeesSocial Security Number or Employer Identification NumberBefore the first payment
1099-NECNonemployee compensationServices by contractors and freelancers31 Jan, to the IRS and the payee
1099-MISCRents, royalties and other incomeIncludes gross proceeds paid to attorneys31 Jan to payees; 31 Mar to the IRS (electronic)
W-8BEN(-E)Foreign status of the payeeIndividuals (W-8BEN) and entities (W-8BEN-E); claims the treaty rateBefore the payment
1042-SIncome paid to foreign personsAmounts paid and tax withheld15 Mar, to the IRS and the payee

Where to maintain it

  • BP
  • Extended withholding tax

  1. Tax numbers

    Identification › Tax Numbers

    US1 Social Security Number or US2 Employer ID Number, as given on the W‑9.

  2. Withholding tax

    Company Codes › Withholding Taxes

    Withholding tax type and code, recipient type and “Subject to withholding tax”.

  3. Types and codes

    Extended Withholding Tax › Calculation

    One type per form, codes with the income type mapped to the box, and the 30% or treaty rate for 1042-S.

Reporting in DRC

SAP Document and Reporting Compliance runs the 1099 and 1042-S reports from the withholding tax items of the payments. Report definitions can be extended with your own selection fields.

  • US_WHT_1099MISC
  • Run Compliance Reports

Filing with the IRS

Ten or more information returns in a year must be filed electronically. From 1 January 2027 IRIS is the IRS’s only system for them: FIRE takes its last filings on 19 November 2026.

Tax year 2026 forms go through IRIS. Check the SAP output, or your filing provider, before January 2027.

Treasury: payments, receipts and bank statements

US companies pay mostly by ACH and wire, and many still send paper checks. Customers pay the same ways, often into a bank lockbox. Each rail has its own file format in SAP.

US payment rails
RailSpeedLimit per paymentTypical use
ACHNacha networkNext day, or same daySame Day ACH: $1m; next day: set by the bankPayroll, supplier runs, direct debits
WireFedwire Funds, CHIPSSame day, finalNo practical limitHigh-value and urgent payments
RTPThe Clearing HouseSeconds, 24/7$10mInstant B2B payments and payouts
FedNowFederal ReserveSeconds, 24/7$10m scheme limit; banks often set lessInstant payments
CheckPaper, by mailDaysNoneStill common between businesses

Payment flow in SAP

  1. Payment run

    Proposal, review and run for open items.

    • F110
  2. Payment medium

    ACH file, ISO 20022 wire file or printed checks.

    • ACH
    • CGI_XML_CT
    • RFFOUS_C
  3. Positive Pay

    Send the bank the list of checks issued.

    • FCHX
  4. Bank statement

    Prior-day and intraday statements from the bank.

    • BAI2
    • CAMT.053
  5. Import and reconcile

    Import the statement and clear the open items.

    • FF_5
    • FEBAN

Payment medium format

ACH

The Nacha file, with the Standard Entry Class (SEC) code chosen by the payee and the remittance it needs:

CCD
Company to company, with one addenda record.
CCD+
The same, carrying the remittance in the addenda.
CTX
Up to 9,999 addenda records: full remittance for large suppliers.
PPD
To people: payroll, refunds and reimbursements.

Checks and Positive Pay

Checks are printed from the payment run with check management, which numbers every check and keeps the register.

Positive Pay fights check fraud: the company sends the bank the list of checks issued, and the bank pays only checks whose number and amount match.

RFFOUS_C
Print checks from the payment run
FCHN
Check register
FCHX
Check extract for Positive Pay

Lockbox

Customers mail checks to a bank lockbox. The bank deposits them and sends a file that SAP uses to clear the open invoices.

SAP reads BAI and BAI2. Choose BAI2: it matches more payments automatically and handles deductions and residual items.

  • FLB2 import
  • FLB1 post-process
  • OBAX parameters

Bank statements

BAI2
The US standard, prior-day and intraday
CAMT.053
ISO 20022 statement, where the bank offers it

Fedwire moved to ISO 20022 in July 2025. Ask the bank whether its statements now carry the richer wire details.

Fiscal year

The US sets no fiscal year for companies. Each picks its tax year, most often the calendar year, and the IRS also accepts a 52–53-week year, common in retail.

Calendar yearJanFebMarAprMayJunJulAugSepOctNovDecSAP K4 · calendar year1 Jan – 31 Dec · 12 + 4 special periods4-4-5 · 52–53 weeks4wk4wk5wk4wk4wk5wk4wk4wk5wk4wk4wk5wkFederal government… to 30 Sepnext year from 1 OctKey filing dates1234
  1. 31 January · 1099-NEC to the IRS and payees; 1099-MISC to payees
  2. 15 March · Form 1042-S
  3. 15 April · Form 1120, the corporate return (15th day of the 4th month after year-end)
  4. 15 October · Form 1120 with the six-month extension

Dates for a company whose year ends on 31 December. A date that falls on a weekend or holiday moves to the next business day.

  • Choosing the variant

    K4 fits most US company codes. A 4-4-5 or 52–53-week year needs a year-dependent variant, with each period’s end date entered year by year.

    A 52–53-week year adds a 53rd week every five or six years. Enter the next years’ dates before they open.

  • Configuration

    OB29
    Define the fiscal year variant
    OB37
    Assign the company code to it
    OBY6
    Check the company code’s global data

    Screens and paths can differ by release; these are from SAP S/4HANA.

  • The federal year

    The federal government’s fiscal year runs from 1 October to 30 September. It drives the federal budget and grants, not company accounts.

Fixed assets: book and tax depreciation

A US company code carries at least two valuations of each asset: book depreciation under US GAAP and federal tax depreciation under MACRS. States that do not follow the federal rules need a third.

Depreciation areas in SAP’s US sample chart
AreaValuation
01Book depreciationUS GAAP, straight line
10Federal tax: ACRS/MACRSThe federal return; bonus depreciation and Section 179
11Alternative minimum taxOld corporate AMT, repealed for years after 2017
12Adjusted current earningsPart of the old corporate AMT
13Corporate earnings and profitsDecides how distributions are taxed
42 · 43State taxFor states that do not follow federal depreciation
  • 100%

    Bonus depreciation

    Permanent for qualifying property acquired after 19 January 2025 (One Big Beautiful Bill Act).

  • $2.5m

    Section 179

    Expensing limit, phased out above $4 million of purchases; indexed after 2025.

  • States

    Often decouple

    Many, such as California, do not follow federal bonus depreciation. That is what the state areas are for.

References