How does Item Sales Tax work in Dynamics AX?

1.     There are Item Sales Tax Groups, Customer Sales Tax Groups, and POS Store Sales Tax Groups

2.     All items that may be taxable must have an Item Sales Tax Group associated with them

a.     The Item Sales Tax Group should include ALL sales tax codes that are applicable for all Customer or Store sales tax groups

3.    To calculate tax properly, there must be a match between the sales tax codes assigned to the Customer or Store Sales Tax Group, and the sales tax codes assigned to the Item Sales Tax Group – no match, no tax, period.

4.    Within AX, a match between the codes in the Customer Sales Tax Group and the Item Sales Tax Group will calculate tax on a sales transaction

5.    Within POS, a match between codes in the Store Sales Tax Group and the Item Sales Tax Group will calculate tax on a POS transaction

a.     Caveat – you can override the taxation at the Store level by checking the ‘Use Customer-based taxes’ flag on the Store setup to use the sales tax group assigned to customers

6.     The ‘TAXEXEMPT’ sales tax group will prevent taxation for any customer who is designated as such by virtue of the 0% Tax Code associated with the Tax Exempt sales tax group