Taxable and Non-Taxable Items and Accounts

When you sell an item at POS, the system checks the following:

The item¾The Tax Status field in Inventory Maintenance indicates if this item is taxable, not taxable, always taxable, or if the item has a line-item tax code associated with it.

and

The customer¾The Taxable? field in Customer Maintenance indicates if this customer’s tax status is taxable or not taxable.

Use the following table to understand how the system calculates tax.

If	Then the system
Both the item and the customer are taxable	Calculates the appropriate tax when you total the transaction.
The item is not taxable in Inventory Maintenance (the Tax Status field is set to ”N”)	Does not calculate tax (regardless of the customer’s tax status) and posts the item with the letter ”N” in the Codes column.
The customer is not taxable	Does not calculate tax (unless the item’s Tax Status field is A, then tax is calculated) and posts items on the transaction with the letter ”N” in the Codes column.
The item is always taxable in Inventory Maintenance (the Tax Status field is set to ”r;A”)	Always calculates tax on the item regardless of the customer’s tax status.
The item has an item-level tax code	This is the only tax the item is subject to. This means that the item is not subject to any tax assessed at the transaction level.

See Also

Selling a Taxable Item Without Tax

Charging Tax on a Non-Taxable Item, or to a Non-Taxable Customer

Setting Up Line-Item Tax