Item Tax Category

The Item Tax Category field is stored in the Inventory Master file and it is used to handle situations where a particular item is taxable in one location (usually a state) and not in another.  If required, a Gencode table can be set up listing the relevant Tax Category codes (based on item categories like labor, hardware, software, or based on tax categories like always taxed, taxable in some states).  The appropriate Tax Category is then assigned to all inventory items using the table.  Once the tax categories have been defined and loaded into the inventory records, exception tables can be set up in the Gencode table for each of the category/state combinations required.  The exception records need to be set up only for states in which the tax flag on the item is not the same as the tax treatment of the item in the state.  For example: If services are nontaxable in all states except 4, you can set up 4 tables (one for each state), that can be used to modify the taxable treatment for the items assigned to the service tax category.  The item taxable flag is set to N (to correctly handle the bulk of the states) and the tables are maintained only for the exceptions to the rule.  In this example you might have Gencode Tables set up as follows.

Table used to categorize items for sales tax purposes

Table Name

Code

Description

F70:203

Service

Service Items Taxed by State

F70:203

Normal

Normal Items taxable based on the Inventory flag.

Table used to handle Service Exceptions (states where services are taxed).

Table Name

Code

Description

Data1

TAXEX-GA

Service

Georgia Service Taxable

Y

TAXEX-TX

Service

Texas Service Taxable

Y

TAXEX-VT

Service

Vermont Service Taxable

Y

TAXEX-PR

Service

Puerto Rico Service Taxable

Y

In the above example, the system would use the tax category of item being sold, and the state that the item is being shipped into to determine whether to charge tax for services.  If the item is a service item and is sold in GA, TX, VT, or PR (based on state in shipping address), the system would charge tax for the service item based on above information even though the Inventory Master record indicates the item is normally nontaxable.