In general, materials can assign to various categories like taxable, free items, standard items etc. SAP item category determination helps to support various complex business logic and enhance profit for an organization with this simple configuration. It has influence on correct downstream processes like delivery, shipping and invoicing. This is specially true if you are looking at launching multi-channel commerce on top of SAP.

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We can also achieve this functionality in SAP by maintaining item categories. Item category notifies the behavior of a line item in a sales order i.e. whether it is taxable, free item, delivery relevant, pricing relevant etc. SAP uses item category to process a material based on sales document type and item category group of a material.

Item Category determination in SAP

To make it understandable, we are taking an example of a company. The company sells few products as taxable. They can also offer a free item, if customer purchases a minimum of 5 quantity of a product. Some products are directly shipped by a third party to the customer. These kinds of business scenarios can be achieved by maintaining correct item category determination set up within SAP.

We are use transaction code VOV7 to define new categories. Some of the more usual item categories, we encounter are listed in the table below.

Item Category CodeDescription
TANStandard Item which is relevant for pricing and billing
TANNFree of Charge item
TATXText item in an order
AFXInquiry item
TADSales of Service


Factors which influence item category determination

Now let us look at how item categories get determined within SAP. The factors which influence the item category determination include

  • Sales Document type – If you are creating inquiry versus order, for example, you may find the item category determined for the same product as different. For example, you may find AFX as the item category within inquiry as compared to TAN in the order.


  • Item Category Group – The item category group is defined in sales area view of material master and plays an important role in the item category determination. For example, a product could be a text item which irrelevant for delivery.


  • Usage Indicator – It may so happen that same material can be sometime used in a different way. For example, sometimes you may send free samples to the customers. This field can help you influence the item category determination in such cases. The usage indicator is maintained in view TVVW and can be set up within customizing. One more usage could relate to item proposals.


  • Higher Level Item category – When there are higher level items in an order, the item category determination of the dependent item may depend on the item category of the parent item. In such cases, you will fill this information in the item category determination.


Having understood the parameters which can determine the item category determination, lets look at the steps which need to be followed for configuring item category determination.

Demonstration of SAP item category determination

In the below screen, we will show item category determination in a step by step manner. Please refer to the information in the section below.

Step 1: Launching the item category determination 

Enter transaction code VOV7 in SAP SD Master Data Screen

Screenshot of enter transaction code VOV7

Step 2: Start the creation of a new item category

  • In the below screen list of all SAP item categories and user defined item categories are displayed.
  • Click on New Entries.

Screenshot of New Entries

Step 3: Setting up the details of the item category

  • While creating new Item category, following sections could be filled
  • Item category name
  • Billing relevance
  • Pricing relevance
  • Check the Business item, Schedule line allowed, Weight/Volume. relevant, Credit active and determine cost and save the information

In our article, we are creating an item category for free delivery items. So I am defining item category Z012 and name as free of delivery item.

Screenshot of defining item category Z012

Screenshot of Prompt for Customizing request

Step 4: Assigning item category to sales document type and item category group

  • Enter transaction code VOV4 in SAP SD Master Data Screen

Screenshot of enter transaction code VOV4 in SAP

  • In the below screen list of all SAP assigned item categories to sales document type are displayed.
  • Click on New entries to assign item category to sales document type and item category group.

Screenshot of list of all SAP assigned item categories

  • Enter Sales document type, item category group, item usage, item category higher level item, and item category and save the information.

In this example, we are assigning to order type OR, item category group as NORM (standard item), item usage as LRES, higher level item category as TAN, and item category as Z012.

Screenshot of enter Sales document type

Screenshot of prompt for Customizing request SRIK900015

  • Assigned item category will be displayed here.

Screenshot of assigned item category

By following the above steps, you can create item category and assign item category to sales document type and item category group in SAP. We sincerely hope that this was useful and any comment of feedback will be very helpful.

Read this article on how item category plays a role in configuring drop shipping within SAP.

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