Tax rules setup for this particular situation

There are two taxes (State tax and Local County surtax).

State is always fixed at let’s say 5%, and the County surtax varies (from 0.5% to 1.5%). These get added to a total. So 5%+1% for example for a total of 6% tax on a sale transaction.

Now, there are a couple of rules and I do not think erpnext can do them, but if anyone thinks it can, please let me know.

County tax varies based on the County where the product is finally tendered. So if the origin sale County is at 0.5% but the delivery is in a County where the surtax is 1.5% then the total tax would be 5%+1.5% = 6.5% because it was delivered in a County that had a higher surtax rate.

Furthermore, the County sales surtax applies to the first $5,000 when the following conditions are met:

Meet the qualifications of a single sale which consists of
· a sale of either an individual item,
· a single item bought or sold in bulk, or
· items that go together to form a working unit.

Example 1

Item “A” is sold and delivered into a 1% surtax county. The sales price is $7,000. The surtax cap is $5,000. The tax is computed as follows:

                             $7000 X 6%    =    $ 420 (state sales tax)
                             $5000 X 1%    =    $   50 (local county sales surtax)

Total tax due = $ 470

Example 2

A bulk sale of “product B” is made to a customer. All the “product B” is the same size and type. The total sales price is $20,000. The “product B” is delivered into a .5% surtax county. The surtax cap is $5,000. The tax is calculated as follows:

                          $20,000 X 6%     =    $1,200 (state sales tax)
                            $5,000 X 0.5%  =     $   25 (local discretionary sales surtax)
                              Total tax due  =    $1,225

So to conclude:

 •  The local county sales surtax should only be charged on the first $5,000 of a single item bought or sold in bulk, and sold in a single sale.

 •  The local discretionary sales surtax should only be charged on the first $5,000 of items that form a working unit, sold in a single sale.


Thanks for the detailed elaboration of your query.

To manage different surtax, you should set multiple Sales Taxes and Charges master, like:

  • State tax + Surtax 0.5%
  • State tax + Surtax 1%
  • State tax + Surtax 1.5%

Based on the territory of Customer, you can specify Sales Tax and Charge master in that Customer’s master itself. On the selection of Customer in the sales transaction, respective Sales Tax and Charges masters will be auto-fetched.

For the calculation of surtax based only $5000, this is not available out of the box in ERPNext. Following are the work-around using which you can implement it in ERPNext.

  • Since Surtax cap is only applied if on item is sold, you can calculate Surtax externally, and enter final Surtax Amount as Actual in your sales transaction.


  • Based on the base price of an item, you should reduce %tax for the Surtax. For example, if Surtax applied is 1% on 20,000. Since you want tax to be applied on only $5000, you should reduce tax rate for the Surtax to 0.25% (5000 * 0.0025).

Since is an open source application, you can consider getting this specific function customized in your ERPNext account. Will lets developers community pool in their ideas on how it could be automated.