Tax Category Definition 
Tax Category Definition
You can define tax categories by choosing the Customizing path for
maintaining tax categories.You have to define tax categories for the account types D (customers) and K (vendors). You can use the same tax category for both account types. The tax category code can be freely defined.
You need to enter the following information for each account type and tax category:
If you set this flag, a message appears when you enter the document informing you whether the tax category is applicable. Normally, this flag should always be set.
If this flag is set, an exemption from this tax category is allowed.
Description text for the tax category.