HST Customer Tax Code vs Inventory Tax Code

Question

We set up our customers with a tax code appropriate to each as we sell across Canada. We have a mixture of part numbers that attract HST and part number that are HST exempt. In the inventory module we have said Yes to exempt in the Tax page for those inventory items that are exempt. 
 When we produce an invoice for any of these tax exempt products HST is not calculated, which is what we want, but the invoice prints out the tax code that is assigned in the AR tax page and not the tax exempt that is assigned to the inventory part number. To me the invoice is misleading, a tax code G would lead one to believe that tax is charged when reality it isn't. Here is a print screen of an entry I did in the sample company to test to see if the sample company was set up different than ours. It wasn't. 
 
 I know we have the option to change the tax code during data entry from G to E and it will print out just fine but I am thinking that the system should be able to handle this. I just don't know where to set the default for this. I have searched this site but haven't found an answer. 
 We are just about to start selling a new line of products that are tax exempt and life would be a whole lot easier and mistake proof if the system can do this automatically. There has to be tons of companies that sell products with different taxes and not have to enter the tax code line by line on each product. 
 Can anyone tell me the magic default setting to make this happen for us? 
 Thank you in advance for your time to help us out. 
 Cathy

Richard S. Ridings · Accepted Answer

Cathy, 
 The short and easiest answer is that smithco is correct. Change the tax code from the default for the customer to what it should be for the specific items. 
 Contrary to what smithco indicated in her last message, there is no tax code for an inventory or service item, only the concept of whether that item is exempt from a particular tax all the time or not. If it is marked exempt, no tax code will make it calculate because that is part of the law. There is no way to easily control whether an item is taxable at GST 5%, HST 5%, HST 13% or even HST 0% for example. That must be done directly on the invoice to my knowledge. 
 I haven't tested this concept I am about to mention in about 8 years and your's would be much more complicated than this. At one point I did setup one tax code to handle if an item at a convenience store should allow GST 5%, PST 8% or PST 12% (might have been 10% for liquor). With a combination of setting up taxes, combining them all onto a tax code, and then using the exempt status on each item, we were able to make it calculate correctly by setting that tax code up as a default for each customer. Any item that came across the counter always had the correct tax and I believe we managed to get the tax description appropriate in that client. However, that might not be easily possible for your circumstances. 
 For you, if you were to take on this mission, you might need any combination of taxes for GST 0%, GST 5%, HST 0%, HST 5%, HST 13%, HST 14% or HST 15% depending on if you are selling to all provinces and whether the items are exempt or zero rated and if you sell items at 5% as well. So it may not be as complicated as I make out here. As I said, I have not tried it with your exact circumstances though I believe it is theoretically possible. It would take a couple of hours to figure out the right combination of settings and it may not be worth the effort. 
 An alternative might be to use one of the pop up Additional Info fields for the inventory items and indicate which tax is applicable in that field so the user is made aware each time an item is selected. I would only do this for items that are always exempt if that is the smallest number of entries for you.

Sage 50 Canada

HST Customer Tax Code vs Inventory Tax Code

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