Tax Mode

Enter the type of tax mode to be used with this tax code. This field affects prompting, defaulting, and calculation logic. Valid entries are:

• Area based
• Item based

A tax system with the Tax Mode of Area allows tax rates to be entered at the Header level, while the Tax Mode of Item only allows rates to be entered at the item level. An example of an Area system is in the United States, where all items of a specific area are taxed at a specific Area rate (with possible exemptions at the item level).

The Item type system is used in the United Kingdom. There, regardless of the location of the sale, taxes are based on each item of the sale (commonly referred to as a Value-Added Tax or VAT system).

Canada uses both types of systems. Its item based tax is called a Goods and Services Tax (GST) while the area system is referred to as Provincial Sales Tax (PST).