Tax Rule
In ERPNext, a Tax Rule computes taxes on transactions automatically based on a predetermined condition.
Which Tax Template (Sales or Purchase Taxes and Charges Template) should be applied to a transaction is up to you to decide. The following is used to determine this: Client or Client Group
Customer or Customer Group
Supplier or Group of Suppliers
Item or Group of Items
Tax Category
Accessing Tax Rule
To view the Tax Rule list, visit: Go to:
1. Prerequisites
Before establishing a Tax Rule, ensure that you have established:
Sales Taxes and Charges Template (for sales transactions)
Purchase Taxes and Charges Template (for Purchase transactions)
Note: Avoid using the same Sales/Purchase Template directly in both a Tax Rule and an Item Tax Template. If you want identical rates, create a separate template with a different name to prevent conflicts.
2. How to Create a Tax Rule
Go to the Tax Rule list and click New.
Select whether the rule should apply to purchases or sales under Tax Type.
Select the appropriate tax template.
Define criteria such as:
Client or Client Group
Supplier or Supplier Group
Item and Item Group
Category of Taxation
Indicate the start and end dates if the rule is only applicable for a specific time frame.
Set priority:
Priority 1 is the highest.
Lower priorities are priorities 2, 3, …
Save the document.
3. Features
3.1 Auto-Applying Tax Rule Based on Customer / Supplier
If only that party is subject to the tax, select a customer or supplier.
If the tax rule applies to all, leave it blank (all suppliers/customers).
The billing and shipping addresses of a selected customer or supplier will also be automatically retrieved.
3.2 Auto-Applying Tax Rule Based on Item / Item Group
In the tax rule, define an item or group of items.
Each time those items are included in a transaction, the rule will be automatically applied.
3.3 Setting a Tax Category
Depending on the circumstances, a transaction can apply multiple Tax Rules by assigning a Tax Category.
In their master records, suppliers and customers may be given a tax category.
3.4 Validity
For time-based tax regulations, use Start Date and End Date.
The rule is always applicable if both fields are empty.
3.5 Priority
If multiple Tax Rules apply to the same transaction, priority establishes the priority.
Higher priority is indicated by a lower number.
4. How Does Tax Rule Work?
When you create a new sales or purchase transaction, ERPNext verifies all tax rules. It will automatically apply the appropriate tax template based on the following: Customer, Supplier, Item, Tax Category, and Address.