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Sales tax codes

Sales tax codes are the core mathematical drivers of the ERP Tax Engine. They define the precise numerical rates, calculation origins, rounding rules, and the foundational General Ledger routing for every distinct tax your organisation handles.

Creating a Sales tax code​

To configure a tax code, navigate to Tax > Setup > Sales tax > Sales tax codes.

The primary identification requires a unique alphanumeric Code (e.g., STD_5, ZERO_0) and a descriptive Name (e.g., Standard VAT Rate 5%).

Tax code information​

This section binds the mathematical tax code to your financial infrastructure:

  • Tax posting group: You must definitively link the code to a previously configured Ledger posting group. This ensures that any financial amount resulting from this code knows exactly which GL liability or asset account to post to.
  • Rate (%): The effective mathematical percentage applied by this code.

Tax calculation settings​

The calculation settings provide immense flexibility for handling complex, international tax regimes:

  • Calculation origin: Dictates the financial base amount upon which the tax percentage is calculated.
    • Percentage of net amount: The standard origin. Tax is calculated on the transaction line's net amount (excluding other taxes).
    • Percentage of gross amount: Used for tax-inclusive pricing or cascading taxes.
    • Amount per unit: A flat rate applied per unit of measure, regardless of the financial price (e.g., a fixed environmental disposal fee per item).
  • Calculation method: Defines if the tax is applied to the Whole amount or if it calculates based on tiered intervals.
  • Rounding precision & method: Enforces specific jurisdictional rounding laws (e.g., rounding to the nearest 0.01 using a Normal method vs. rounding Up to the nearest whole currency unit).

Calculation priority (Cascading Taxes)​

Accessible via the Hide/Show advanced settings toggle, the Calculation priority determines the sequence in which taxes are applied when a single transaction line triggers multiple tax codes.

  • Codes with lower priority numbers (e.g., 10) are calculated first.
  • Codes with higher priority numbers (e.g., 20) are calculated subsequently.
Tax-on-Tax Scenarios

If a Priority 20 tax code has its Calculation origin set to Percentage of gross amount or Tax on Tax, it will calculate its percentage based on the base amount plus the tax amount already calculated by the Priority 10 code. This single-pass loop natively handles complex cascading tax requirements.

Next Steps​

Now that the individual tax codes and their mathematical rules are defined, you must group them logically so they can be assigned to your Customers, Vendors, and Products. Proceed to the Sales tax groups documentation.