Tax to items application

When you create a purchase order, the items are taxed according to the tax status and the tax code that is associated with each item. The tax status indicates if the item is taxable. The tax code indicates the tax rate and the type of tax. You can apply a tax code after you determine that the item is taxable.

You can define tax defaults, including tax status and tax code for each inventory and non-stock item on these locations:

  • Item master file
  • Item location file
  • Purchase order header
  • Purchase order line

When you add tax information at the header level, the tax is applied to any line on the purchase order that does not have a tax status and tax code already associated with it. In other words, the tax default only override items with a blank tax code on the item master or item location files. For each line of the purchase order, you have the option to specify an individual tax status and tax code.

Note: If a tax value exists on both the item master and item location files, then the tax from the item location file is the default. This feature is in place so that you can regulate the tax status according to its use at each location.

Each item must have a tax status and tax code that is associated with it before you can release the purchase order. If the tax status and tax code from the item master or item location file are not used as defaults, then you must specify this information on the purchase order. Tax codes are set up in the Tax solution. You must set up tax codes before you can use them in Purchasing.