Set up a tax category table in the Gencode file. 

Create a code in this table for services that are taxed differently based on state.  Assign this code to all service or labor items that are taxed differently by state in the Inventory Master program.  The Tax category codes are maintained in a Gencode table (F70:203) in order to restrict the information that can be used when assigning tax categories to inventory items.  An example of a Tax Category Table is shown below.

Table used to categorize items for sales tax purposes.  One record should be entered into this table for each of the tax categories that you wish to maintain on the system.

Table Name	Code	Description
F70:203	Service	Service items – taxed by State
F70:203	Normal	Normal item – taxable based on inventory taxable flag.

Set the Inventory Taxable Flag to N (meaning it is normally nontaxable) for all service and labor items in the service tax category.  This step can be completed in the Inventory Master program.