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Tax Exempt Items are Taxed on the Invoice

Problem

Products are marked as tax exempt (N) on a sales order but are still taxed (T) when an invoice is generated.

Reason

Tax and tax exemption works through a hierarchy setting structure to determine what and who are exempt and when to charge or not charge taxes. 

Priority                      Tax Profile Location                     Details
1 Customer Profile

Global setting that automatically applies to all sales orders for that customer. Overrides any tax profiles set on individual sales orders or products.
2 Sales Order

Sets the tax profile specific to that sales order. Overrides any tax profiles set explicitly on a sales item (product).
3 Sales Item (Product) Sets the tax profile specific to that item. Only takes effect if there is no tax profiles set on the sales order or customer profile. 

Solution

1. Ensure the customer profile does not have taxes assigned.

  1. Access the Sales Centre then click Maintain Customers.
  2. Find the customer and double click on it or click on it once and click Edit at the bottom of the screen.
  3. Click on the Billing Details tab.
  4. From the Tax Profile dropdown, select the blank option.
  5. Click OK to save. 

2. Reverse the invoice.

If the invoice was created using Route Delivery Slips.

  1. Access the Shipping Centre then click Maintain Route Delivery Slips.
  2. In the top right corner, select the delivery Date of the invoice you need to reverse.
  3. At the bottom of the screen, from the View dropdown, select All Slips.
  4. Find the record and double click on it or click on it once and click Edit at the bottom of the screen.
  5. In the top right corner click Reverse Invoice.

If the invoice was created using Delivery Slips.

  1. Access the Accounting Centre then click Approve Invoices.
  2. In the grid at the bottom of the screen find the associated record and single click on it then click Reverse Invoice in the bottom right corner.

3. Update the Sales Order.

  1. Access the Sales Centre then click Maintain Sales Orders.
  2. In the top right corner, select the Customer the order and invoice are for.
  3. At the bottom of the screen, from the View dropdown, select All Orders.
  4. Find the record and double click on it or click on it once and click Edit at the bottom of the screen.
  5. Click in the Tax Profile field and press backspace on your keyboard.
  6. Click OK to save the order.

4. Recreate the Invoice. 

If the invoice was created using Route Delivery Slips.

  1. Access the Shipping Centre then click Maintain Route Delivery Slips.
  2. In the top right corner, select the delivery Date of the invoice you need to recreate.
  3. At the bottom of the screen, from the View dropdown, select All Slips.
  4. Find the record and double click on it or click on it once and click Edit at the bottom of the screen.
  5. In the top right corner click Create Invoice.

If the invoice was created using Delivery Slips.

  1. Access the Accounting Centre then click Approve Invoices.
  2. In the grid at the top of the screen find the associated delivery slip and single click the left margin beside the D.S. No. A green checkbox will appear indicating you have selected this record.
  3. On the right side of the screen click Create Invoice.