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In some states a customer does not pay the normal state sales tax, however because they are, for example, a Utility companies (i.e. electric, gas) they are required to pay ½ the normal tax rate.
Problem:
A utility is required to pay 3% sales tax, versus the normal state sales tax of 6%.
Solution:
- Denote the customer as Non-Taxable/Exempt ( AR module, Customer Master File - Task 17, St. Tax Flag - field 20).
- Setup a Tax Zone code for 3% (AR module, Tax Zone-Task 23):
Selling Tax Tax
Tax Zone Division Desc. Report Title Rate Basis Frt/hnd
33333(i.e.) 01 GOV Utility Tax 3 T N
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Field 8 (Tax Basis) is an important field IF:
- only items that are marked as Taxable - usually supply items (Inventory module, Item Master - Task 17, Taxable - field 20) are charged the 3% tax, put a "T" in field 7.
- only items that are marked as Non-taxable/exempt - usually labor items are charged the 3% tax, put a "N" in field 7
- the entire sales order and all items (taxable and non-taxable) are to be taxed, the put a "B" in field 7.