How to exclude certain items from being taxed?

[Roamin]

Hi,

I can’t figure out how to exclude certain items from being taxed in a sales order. I have create my sales taxes and charges template that applies both provincial and federal taxes to my sales order. Some items are not actually sold but rather they are provided against a consignment (display refrigerators). I have made an item tax template of 0% for those specific items. Now , no matter what I do , the sales taxes and charges are always applied on these items, even if the item tax template is set to 0%. The sales taxes and charges is set to default and both tax lines are set to “On net total” so since my consignment value is part of the total , it gets taxed. I don’t understand how to properly exclude single items from being taxed. Am i supposed to make a new custom field for items to hold the consignment , but I’ll still want that amount to appear in the item list of a sales order / invoice. Will it need to be in a different column than the normal rate ? And then create new lines for totals , grand totals? I’m sure there’s a simpler way to have items excluded from taxes.

Thanks in advance for the help and pointers!

[volkswagner]

You should be able to assign tax rules via item groups. Unfortunately, this is broken.

Ideally you’d set a tax rule based on your taxable item group, then items not in the group don’t get taxed. Unfortunately assigning a tax rule to an item group, ignores the item group and applies taxes on net total regardless of the group the Item is a member of.

[mangroliya]

Hi,

Item Tax Template is the answer. Please create Item tax template for all the slab rates. Assign relevant item tax template to each items.

Create Sales Tax Template with Zero Rate using all tax accounts.

Now, System will apply the correct tax rate per item.

Thanks,

Divyesh Mangroliya

[volkswagner]

@mangroliya I don’t think this is practical for some jurisdictions. In the US each state has unique tax rates. In a single state like NY, there are 83 tax jurisdictions. For NY alone this would translate to 83 tax lines in each item.

Adding to the impracticality, Item tax does not allow for a rate, which means when price changes we would have to update our item taxes for each item, yes?

Perhaps I’m missing a critical description that’s not documented.

[mangroliya]

Hi,

Yes, it is a bit complex, but it works. Below is my setup, I have two Jurisdictions (Which I am handling with Tax Category):

Item Tax Template:

Sales Tax Template:

Tax Setup on Item Master:

Thanks,

Divyesh M.

[volkswagner]

I was wrong about tax rate in Item Tax, but this solution is impractical for the USA (especially if the company is required to collect sales tax in all 50 states).

Fixing the tax rule bug would be more appropriate. When creating a tax rule based on an Item Group, only items in the group should get tax applied. This is a bug, or the field should be removed from the docType.

[rthm93]

Hi, I am new to ERPNext and I am now exploring ERPNext for my business. I don’t see the linkage between Sales Tax Template, Item Tax Template and the Item master. Could you please explain more?

In my own tests, the tax is either applied to all items, or they are not applied at all. I want to achieve something similar to OP where by tax is only applied to certain item. The following are my settings for Item Tax Template and Item Master:

When I try to create a new Sales Invoice, a new line is added into the Sales Taxes and Charges, but the tax rate is not applied to the item. Is this expected? Or am I missing some configurations?

[rthm93]

I managed to figure out how to apply specific tax to a specific item when creating a Sales Invoice. I would need to edit the line item and select the Item Tax Template manually. Now the taxes are being calculated correctly.

My next question is are there any ways to select an Item Tax Template for an Item or Item Group automatically when I added the item?

[Roamin]

You need 3 things setup to properly apply tax templates based on items.

Tax category
Item tax template.
Sales Taxes and Charges Template

You create a tax category , let’s take my province for example. In Canada , taxes change by provinces. I create 2 different categories.

Tax Quebec
Tax Ontario

The Quebec customers , have in their customer doctype their taxe category set to Tax Quebec in the Tax tab, under category. When this is set , creating a new sales order will set the correct Tax category for this customer.

Sales Taxes and Charges Templates.

This is where you set the actual taxes. Create a new template, in this example called “Tax and Charge Quebec Template”
In this item , you set the category you setup earlier , Tax Quebec
In the Sales Taxes and Charges table , you add the appropriate taxes and their type. In my case I have 2 lines, one for QST and one for GST, they are both applied to the “On Net Total”.

Last is Item Tax Template. I have here 2 items. Taxable items , Tax free items.
in Tax free , I have both QST and GST set to 0 for their tax rate.

For Taxable items , i have both QST and GST listed , with their appropriate rates.

Once you have all this properly setup , you go into your item list. Pick an item , go in its Tax tab.

Choose the applicable item tax template (Taxable items in my case) and choose the Tax Category (Tax Quebec).

Now , when you add an item in the sales order , the approprite item tax is set according to what you just selected in the item itself. This will allow you to have apply different tax templates on items. An item can have more than one template listed and it will be selected based on the Tax Category set in the sales order.