Calculate tax on prices when Prices include taxes is enabled

This article provides information about how the Exclude from base amount calculation parameter of a tax code is used.

You can use the Exclude from base amount calculation parameter to calculate tax amounts in a flexible way. When this parameter is enabled for a tax code, if prices include sales tax, the Tax calculation service calculates tax amounts for the marked sales tax code as if it wasn't included in the base amount.

The following example shows how the tax calculation is done.

A sales tax group and an item sales tax group contain two sales tax codes. The Exclude from base amount calculation parameter is enabled for one tax code.

Tax code	Tax rate	Exclude from base amount calculation
TaxCodeA	20%	No
TaxCodeB	10%	Yes

If a sales order or a purchase order is created where the Prices include sales tax option is enabled, and the net amount of a line equals 120, the tax is calculated in the following way.

Tax code	Tax base amount	Amount
TaxCodeA	100	20
TaxCodeB	120	12

Note

In this example, tax code TaxCodeA is configured as By Net amount, and tax code TaxCodeB is configured as By Gross amount. If tax code TaxCodeB is configured as By Net Amount instead, its tax base amount equals 100, and its tax amount equals 10.