When configuring a tax code, several fields must be filled out.
Enter a descriptive name for this tax code.
The name appears in dropdown lists when selecting tax codes on transactions.
Examples: 'VAT 20%', 'GST 10%', 'Sales Tax 8.5%', or 'Tax Exempt'.
Enter an optional label to display on customer-facing documents instead of the tax code name.
Use this when you want a simplified or localized tax description on invoices.
Example: Name 'VAT Standard 20%' could have label 'VAT' for cleaner invoices.
Leave blank to use the tax code name on all documents.
Select the type of tax rate calculation for this tax code.
Zero (0%) - For tax-exempt or zero-rated items. No tax calculation or posting required.
Pass-through (100%) - Posts 100% of the transaction amount as tax. Used for import duties or when the entire amount represents tax.
Custom % - For standard tax calculations with specific percentage rates. Most common option.
Choose how to structure your custom tax rate.
Single rate - One tax percentage applied to the transaction amount. Most common for simple tax systems.
Multiple rates - Combine multiple tax components into one tax code. Useful for compound taxes like federal + state taxes.
Each component can have its own rate, account, and reporting category.
Select the balance sheet account where tax amounts will be posted.
The default Tax payable account accumulates tax owed to authorities.
Create custom tax liability accounts in your Chart of Accounts for specific tax types or jurisdictions.
This helps track different tax obligations separately and simplifies tax return preparation.
Mark this tax code as inactive to hide it from dropdown selection lists.
Use this for tax codes that are no longer applicable due to rate changes or law updates.
Historical transactions using this tax code remain unchanged and appear correctly in reports.
Reactivate anytime by unchecking this box.