Understanding Tax Codes
Before adding or changing any Tax Codes, we recommend reading entirely through all the sections on Tax Codes (this Overview, Tax Code Setup and Adding A Tax Code) as well as all sections on Product Lines (Overview of Product Lines, Set up Product Lines and Grouping Categories Into Product Lines).
To understand why Tax Codes are integrated with Product Lines and Categories, it helps to understand three things:
●All inventory items must be assigned a Category. Examples of Categories include blouse, dress, table, sofa, etc.
●Every Category is in turn assigned a Product Line for reporting purposes. Categories only have to be assigned a Product Line once during setup.
●Each Product Line in turn is assigned a Tax Type. Product Lines likewise only have to be assigned a Tax Type once during setup.
The reason for the three points above is simple: assigning a Tax Code via the Product Line to every Category assures the correct tax is always charged.
In addition, linking taxes and Categories speeds item entry. Again, the reason is simple: by affiliating Tax Types and Categories the need to enter the tax rate every time an item is added to inventory is eliminated.
Once you have read all of the sections listed in the first paragraph above, perform the following steps in order:
1.Set Up Taxes.
2.Set Up Product Lines.
3.Set Up Categories.
4.Assign Product Lines to Categories.
5.Associate Attributes to Categories.
6.(Optional) Establish prices using the Pricing Guide.