Tax code field in account definitions

I don’t seem to be able to find a reference regarding the usage of tax codes in the chart of accounts. Can anyone point to a guide or a forum thread?

This is the Guide: Create and use tax codes | Manager.

Tax codes themselves do not appear on the chart of accounts. Only the tax liability accounts used for posting tax transactions appear. Long-time users may still be using the Tax payable account that used to be automatic. When the ability to designate your own tax liability accounts was introduced, this was converted by the update script to an ordinary account with the same name. New users will not have that account, but only the ordinary tax liability account(s) they create themselves.

I was reading that and then it says:

  • Leave the Tax Code field with the default, No tax entry.

So I was wondering if there is a case when it’s not empty.

Not that I can think of. Since tax liability accounts are no longer built in, they are defined using the same form as other balance sheet accounts. That form is tagged as balance-sheet-account-form. The tax code field is there for other situations.

Maybe someone else can think of a situation where debits and credits to a tax liability account would themselves be taxable at a uniform rate, but I cannot.

thanks @Tut

I use it like this.

Amd after that every time in invoice where I choose that account Tax Code is populated automaticly with correct code, no need to enter anything.

What you show is not a tax liability account, but a P&L account. The discussion was about tax liability accounts. Your technique is discussed in this Guide: Add an ordinary account | Manager.

Here is opening post. Nowhere here I read specifically that @novica is asking for Tax Liability Account in Balance Sheet nor P/L. He said in chart of accounts as general term. Maybe I misunderstood what he want to ask, but that is what is written. Maybe he will explain better, if my answer is on topic or off topic.

He asked about tax codes in the chart of accounts. No accounts except tax liability accounts include any postings from tax codes. I responded about tax liability accounts. The Guide he then quoted was about tax liability accounts. I responded again about tax liability accounts. He marked my post as a solution and posted thanks. If that isn’t a discussion about tax liability accounts, I don’t know what is.

Your example was about P&L account definition.

And once again

So question was about using tax codes, no tax liability accounts, no specifically about balance sheet side or P/L side. So I responded about usage of tax codes in the chart of accounts. As I said @novica will explain better for him self.

And in post #3 he is wondering about

So nowhere else except in P/L side of chart of accounts you normally need to fill it. So I think this was his question.
Maybe marking as solution and thank was out of courtesy for the effort not for original question. If it stays like it is, it is than quite misleading question and solution in my humble opinion. But again I will wait for @novica to clarify the matter.

Thanks for further clarifying. @MarV is right about my question being general about any account in the chart of accounts. So probably my question was a bit off: I should’ve said maybe tax codes field.

I was wondering about what is the purpose of the field, because as far as I can see it shows up as a field regardless of what type of account one would like to add to the chart of accounts.

So maybe it makes more sense to have the field populated on a PL account but not on a BS account? In that case maybe the filed shouldn’t even show up when trying to create a BS account.

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I have changed the subject of this thread to match the bigger question.

As described in this Guide:

Select a Tax Code if all or most transactions posted to this account will have the same tax code applied. For Balance Sheet accounts, this field is often left blank.

No. A uniform tax code could apply to self-defined balance sheet accounts. Many built-in balance sheet accounts, such as Accounts receivable or Fixed assets, at cost do not allow this because there are other methods for setting default tax codes for related transactions. But some, such as Billable expenses, do. There is no way to predict what purpose a self-defined balance sheet account might serve, so default tax codes can be set. A simple example will illustrate.

You create an account to post a loan liability for which fund disbursement and principle repayments are both subject to a financial services tax. You could create a custom tax code for the financial services tax and set it as a default code for that liability account.

Default tax codes are probably more common for P&L accounts. But they are possible for self-defined BS accounts. So the program allows them.

It was obvious from the question what he was asking, but nevertheless, changed subject even better describes it and will be better for search results for someone else.

Yap, I said that with other words. I am also in for freedom of options, so it is up to user how he will structure his chart of accounts.