A sales tax code or rate is a numerical percentage defined for each sales tax jurisdiction, which in turn, intersects with multiple sales tax categories.
When the system uses AvaTax interface, sales tax codes are assigned to products or additional charges in Product Maintenance or Order Entry Automatic Additional Charge Maintenance. For more information about AvaTax interface, see AvaTax Interface FAQ and AvaTax Integration - Dealing with Additional Charges.
When the system uses internal tax functionality, then the sales tax rates are defined and maintained in Sales Tax Rate Maintenance.
To determine if customer taxing is required, the system uses the customer’s ship-to address (entered on the Ship-To tab in Customer Maintenance). If taxing is required, the system matches the sales tax category for the product being bought with the customer's sales tax jurisdiction. If a match is not found, the system will not assign tax for the product being bought and continue to the next product on the customer’s order. If the customer’s ship-to address is tax exempt, the system will not check for a match.
For more information on sales tax, see Customer Sales Tax Setup and Sales Tax FAQ.