Transactions that are subject to sales taxes must be associated with both a sales tax group and an item sales tax group. Sales tax is calculated only for the sales tax codes that are included in both the sales tax group and the item sales tax group.

  1. Click > > > .

  2. Create sales tax codes. For more information, see Create various kinds of sales tax codes.

  3. Click > > > , and attach sales tax codes to the sales tax groups. For more information, see Set up and use a sales tax group.

    Important Important

    If your company operates in the United States, you can set up sales tax jurisdictions as well as sales tax codes, and attach sales tax jurisdictions (not sales tax codes, as instructed in this step) to sales tax groups. Sales tax codes are attached to the sales tax group through the sales tax jurisdictions. For more information, see United States sales tax.


  4. Attach sales tax groups to each customer and vendor and to ledger accounts to which purchase or sales transactions that do not involve a customer or vendor are posted. For more information, see Set up a default tax profile for a customer or vendor.

  5. Click > > > , and attach sales tax codes to the item sales tax groups. For more information, see Create an item sales tax group.

  6. Attach default item sales tax groups to items and ledger accounts:

    An appropriate item sales tax code is then proposed as a default on all sales order, purchase order, and journal lines when you enter the item or the ledger account.

Example: Calculating sales tax

You prepare a sales order to customer ABC for item BATTERY and item RED WINE.

  • Customer ABC is connected to the Sales tax group STD, which includes sales tax codes VAT, BAT, ALC, and CHO.

  • Item BATTERY is connected to the item sales tax group BAT, which includes sales tax codes VAT, EU25, and BAT.

  • Item RED WINE is connected to the item sales tax group ALC, which includes sales tax codes VAT, EU25, and ALC.

The sales tax is calculated for each item line on the basis of the sales tax codes that are found in the sales tax group STD (attached to the customer) and the item sales tax groups that apply to each item:

  • The sales tax for the BATTERY transaction is calculated according to sales tax codes VAT and BAT.

  • The sales tax for the RED WINE transaction is calculated according to sales tax codes VAT and ALC.

See Also