You can define which Tax Template must be applied on a Sales / Purchase transaction using Tax Rule.
1. How to create a Tax Rule
- Go to: Accounts > Taxes > Tax Rule > New.
- Select whether the tax will be applied at Sales or Purchase.
- Select the Sales Tax Template from the ones available.
- Enter the a customer if tax is to be applied for a specific customer.
- Leave it as All Customer Groups to be applied for all customers.
- Set other fields for which you want to activate the Tax Rule.
- This works like a filter, so if you set a customer or a specific region, then the tax template set will be applied to the conditions set in the Tax Rule.
- Set a start and end date if the tax is to be applied only for a specified period.
While making a Transaction the system will select and apply tax template based on the tax rule defined.
The system selects Tax Rule with maximum matching Filters.
Let us consider a scenario to understand Tax Rule Better.
Suppose we define two Tax Rules as below.
Here Tax Rule 1 has Billing Country as India and Tax Rule 2 has Billing Country as United Kingdom.
Now suppose we try to create a Sales Order for a customer whose default Billing Country is India, system shall select Tax Rule 1.
In case the customers Billing Country was United Kingdom, the system would have selected Tax Rule 2.
- Pricing Rule
- Itemized Taxation