The following steps will explain in detail how to add a new Tax Components for Sales Tax you pay when purchasing.
1. First open the Tax Codes [Purchasing] form and then click the New button to clear the form and move your cursor to the Tax ID field.
2. Enter a Tax ID, which can be up to 15 alphanumeric characters long. You should try and think of a an easy to use ID for your tax component. If your tax was for the City of Evanston then you might want to use something like "EVNST". When you have finished entering data for each field, press the TAB or ENTER key to move your cursor to the next field.
3. Next enter a Description for the Sales Tax. This field is primarily used to describe your Tax ID. In the example of "EVNST" the description would be something like "City of Evanston Sales Tax".
4. Enter a Tax Rate, which would be the tax rate you want to setup for the Tax ID.
5. The Use Tax checkbox is used when the purchaser does not pay sales tax for an item that is not intended for reselling but is consumed. For example, a purchaser uses his federal tax id to avoid paying taxes when he buys paper from the supplier. Instead of reselling the paper, he uses it for himself. He should be paying Use Tax to his taxing authority because he did not pay sales tax for something he consumed. When this checkbox is enabled, the Liability account field will be visible and that field is use to select any liability account from the drop down combo box and will serve as contra account for Expense Account. See Use Tax to show you how this feature works.
6. The Account ID field is used to assign an Account ID from the Chart of Accounts form to track the sales tax collected. Click the drop down button (the box with arrow head pointing down) next to this field to open the Chart of Accounts form where you can add or edit an Account ID. On the Expense account field, you can choose any account to be used in place of Expense account.