There is an effect on the price based on the sales tax rule. Whether the price includes or excludes the sales tax can be defined as follows:
- Price includes sales tax: For a 10% sales tax and a 1,000 USD price, the system will allocate 1,000 USD to the vendor or customer summary account and 90.91 USD to the sales tax account. The following diagram illustrates the calculation and posting entries for tax receivable and tax payable:
- Price excludes sales tax: For a 10% sales tax and a 1,000 USD price, the system will allocate 1,100 USD to the vendor/customer summary account and 100 USD to the ...
