How to Set Up Sales Tax in Business Central (2025)
Setting up sales tax in Business Central with the assisted setup guide: tax groups, tax area codes with jurisdiction filters, assigning codes to customers and vendors, and automatic tax calculation on sales and purchase documents. Example uses Fargo (2%), Cass County and North Dakota state tax (5%).
- Introduction and overview of sales tax setup
- General ledger accounts requirement
- Creating tax groups and tax area codes
- Applying tax area codes to customers and vendors
- Completing the setup and document automation
- Managing tax changes and updates
Overview
This 2-minute video from the Microsoft Dynamics 365 Business Central channel (published 2025-05-22) walks through setting up sales tax so that taxes on transactions are calculated correctly. It starts with the general ledger accounts that are needed to track taxes on receivables and payables, then uses the sales tax assisted setup to create tax groups and tax area codes.
The example uses the city of Fargo at 2% in Cass County and a North Dakota state tax at 5%. The tax area code is then applied to customers and vendors, after which sales and purchase documents calculate sales tax from the assigned codes. The video closes with how to change tax setup when something changes, such as jurisdiction boundaries.
Key points
- Sales tax setup requires existing general ledger accounts for tracking taxes on receivables and payables.
- The sales tax assisted setup guide creates tax groups and configures tax calculations; tax area code names can be customized.
- Tax groups are assigned to items to indicate whether sales tax applies to the product.
- Tax area codes calculate tax by customer or vendor location and can be filtered by jurisdiction such as city; names must be unique.
- Apply the tax area code to customers and vendors, manually through their lists if needed, and update it when jurisdiction boundaries change.
- Once assigned, sales and purchase documents calculate sales tax automatically from the tax area codes.
- The demo example uses Fargo at 2% in Cass County plus North Dakota state tax at 5%.
Features
Every feature below: status not stated, demoed.
| Feature | At |
|---|---|
| Assisted setup guide for sales tax | 0:39 |
| Tax group assignment to items | 0:39 |
| Tax area codes with jurisdiction filtering | 1:02 |
| Apply tax area codes to customers and vendors | 1:17 |
| Automatic sales tax calculation on documents | 1:28 |
Quotes
- 0:00 “This video shows how to set up sales tax so you can be sure you’re calculating taxes correctly on transactions.”
- 0:28 “These processes require general ledger accounts for tracking taxes on receivables and payables.”
- 1:02 “We’ll use the city of Fargo with a rate of 2% in Cass County and a state tax for North Dakota at 5%.”
- 1:17 “We need to apply the tax area code to our customers and vendors. The last step is to make sure that this tax rate”
- 1:28 “Now, when we create sales or purchasing documents, Business Central calculate sales tax based on the tax area codes that we just assigned to”
- 1:44 “The setup sales tax assisted setup is a great way to quickly get started. But what if we need to change something?”