Tax Category

If you want to apply different kinds of taxes based on Tax Categories, create Tax Categories from:

Home > Accounting > Taxes > Tax Category

1. How does a Tax Category work

  • Tax category is linked to Tax Rule.
  • This Tax Category can be assigned to a Customer, so when that customer is selected, the Tax Category will be fetched.
  • This will fetch the Sales Tax Template linked to the Tax Rule. Hence, the rows in the Tax table will be automatically filled.
  • Tax Category can be used to group customers to whom same tax will be applied. For example, Government, NGO, commercial, etc.

    Tax Category

2. Assigning Tax Category

Tax Category is automatically determined in a transaction by either the Party Address or Party Master.

  • You can assign Tax Category to specific Parties (Customers and Suppliers).
  • You can assign Tax Category to specific Billing or Shipping Address
  • You can select whether Billing Address or Shipping Address gets preference by changing the Accounts Settings.
  • Tax Category is determined from Party Address first. If the Address is not assigned any Tax Category, then the Party's Tax Category is used.
  • You can also manually select the Tax Category in a transaction.

3. What effect does the Tax Category have in a transaction?

  • Specific Item Tax Templates for that Tax Category are automatically set for items.
  • You can create Tax Rules to automatically set a specific Sales / Purchase Taxes and Charges Template based on different Tax Categories in transactions.