The following example illustrates how some companies might use the field in the form.
A transaction might qualify for a percentage of its amount to be exempt from sales tax if other taxes have been applied to the transaction. If a company has revenue that is partially tax exempt, it is often required to deduct only part of the incoming taxes on its raw materials.
Only part of the sales tax on the raw materials is deducted in the sales tax payment calculation, and the remaining sales tax is posted along with the cost of the purchase.
Example
The sales tax rate is 10%.
Only 90% of the sales tax is deductible.
You enter (100-90) = 10 in the field.
When you post an invoice of EUR 100, the sales tax is EUR 10.
10% of the sales tax (= EUR 1) is not deductible in the sales tax payment calculation.
The result:
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EUR 9 is posted on the sales tax account.
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The EUR 1 that is not deductible is posted as an expense.
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The expense balance, EUR 101, is posted on the appropriate profit/loss account.
