Example: Applying item tax
An organization uses ibuprofen for first aid kits in the administration office and in the hospital. The item records for ibuprofen are set up in the following way:
| Item Record | Taxable Status |
|---|---|
| Item Master Record | N - Non-taxable |
| Item Location - Admin. Office | Y - Taxable |
| Item Location - Hospital | N - Non-taxable |
| Purchase Order | Taxable Status |
|---|---|
| PO Default Tax | Y - Taxable |
| Item Tax | Default |
Usage
Given the situation above, you add a purchase order for ibuprofen for the administration office. The result is that the ibuprofen is taxable on the purchase order. The item is taxable because the Item Location record for the administration office overrides the item master record. Using the item tax option for the purchase order line, you can override this status when creating a purchase order.
There are two types of taxes: invoiced and accrued. An invoiced tax represents an increase to the transaction's amount and prints on the purchase order. An accrued tax has no effect on the transaction's amount and does not print on the purchases order.