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Chapter 8 - Exemptions

This chapter is about exemptions - in other words, the reasons that certain transactions are not taxed. By the end of this chapter, you will learn the following:

  • All the factors that could cause tax on a transaction to be zero
  • Which factors are company-related, which are product-related, and which are transaction-related
  • How to allow a customer to choose these factors correctly in your user interface
  • Test cases that must be understood to correctly handle tax exemptions

One of the most common questions asked about tax software is, “Why is there no tax on this transaction?” Since a tax calculation involves many different factors, let’s begin by analyzing all the reasons that a transaction could be calculated to have zero tax. In some cases, the tax on a transaction is correctly zero; in other cases, a customer is considered exempt from tax.

Let’s begin by looking at the reasons why tax could be zero on a transaction.