Tax to items application

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

To define tax defaults, including tax status and tax code for each inventory and non-stock item, update these files:

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

At the header level, tax is applied to lines on the PO that do not have a tax status and tax code associated. In other words, the tax defaults only override items with no tax code on the item master or the item location files. For each line of the purchase order, an individual tax status and tax code can be specified.

If tax exists on the item master and the item location files, then the tax from the item location is the default. Use this feature to regulate the tax status according to its use at each location.

Each item must have a tax status and tax code before the PO can be released. If the tax status and tax code from the item master or item location are not used as defaults, then specify them on the PO.

Tax code setup is performed in the Tax solution and must be set up before you can use them in Purchasing. For US and Canadian taxes, see the Tax User Guide.