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Working with US Sales Tax

If you are trading from the United States of America and your base currency is USD, USA Sales Tax functionality is incorporated in your system.

To understand how Sales Tax works, first understand the below documents and their interrelationships:

Tax Authorities

Tax Authorities (sometimes called Tax Agencies) correspond to the State departments that set Tax Rates and collect your Tax payments. You should create a Tax Authority document for each distinct authority to which you pay Sales Tax.

Tax Codes

Tax Codes represent names and associated Tax Rates set by specific Tax Authorities. For this reason Tax Codes are associated with their related Tax Authority via a drop-down list.

NOTE:
You can assign a default Tax Code to a Customer so that when an associated Sales Document is created (such as a Sales Invoice), it will automatically be assigned the default Tax Code.

Tax Groups

Tax Groups, group together a set of related Tax Codes and present a single rate which is the sum of the constituent Tax Code Rates. Tax Groups are used when you need to apply multiple Tax Rates to your Sales Line Items.

NOTE:
You can assign a default Tax Group to a Customer so that when an associated Sales Document is created (such as a Sales Invoice), it will automatically be assigned the default Tax Group.

Item Tax Options (ITO)

These are flags indicating if a particular Line Item is Taxable or not. By default a single ITO exists which is called ‘Taxable’. You can specify as many ITOs as you wish, each has a name and a flag to determine if it is Taxable or Non-Taxable. For each Line Item on a Sales Document you can then select from the list of ITOs and determine if the item is Taxed or not.

NOTE:
You can assign a default Item Tax Option to an Item so that when a Line Item is selected, it will automatically be assigned its default Item Tax Option.

Also Read About


Working with Tax Authorities
Working with US Tax Codes
Working with Tax Groups
Working with Item Tax Options
Working with Customers