Tax Codes for Tax-Exempt Sales
You can also create sales/purchase tax codes for sales that are tax-exempt in which case the tax rate is zero percent. You specify this tax code when posting such a transaction and this code is then stored in the line item. When making an advance return for tax on sales/purchases, these transactions can then be displayed separately.
However, you can also post transactions that are not subject to tax without codes, provided the G/L account is marked accordingly in the master record. The Posting without taxes allowed indicator must be selected. This is especially necessary for those countries where tax is calculated using jurisdiction codes, since you would otherwise have to enter a dummy jurisdiction code each time you made a posting, or define a dummy code in the respective master records (cost center, customer, and so on). For all other countries, this would not be necessary, since you can simply create a tax code "Sale not taxable" with zero percent, enter it for the appropriate transactions, and not include this code in tax reporting.
Postings without tax codes do not generate any tax information. They are therefore not included by the programs for tax reporting.
If you post to a tax-relevant account without a tax code, the system issues a warning message. You can deactivate this warning message in the Implementation Guide (IMG) for Financial Accounting under Change Message Control for Taxes. See alsoConfiguring the System Using the Implementation Guide.
The tax code and its definition must not be deleted or changed once items have been posted with it. If you do not observe this rule, the tax amounts would be displayed for the advance return for tax on sales/purchases with incorrect tax rates, or if a tax adjustment is supported for payment transactions, erroneous corrections would be made. In the case of a tax increase, it is particularly important that old codes are not changed or deleted, but that a new entry with the increased tax rate is created instead.
The exception to this rule is tax definitions with a jurisdiction code, the percentage rates of which are date-dependent. A tax adjustment with cash discount deduction is not allowed here.