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Dynamics 365 Community / Blogs / Business Central Functional Insights - By Umang / Configure HST in Business C...

Configure HST in Business Central

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Umang Kapoor Profile Picture Umang Kapoor 17
Step-by-Step Guide: Setting Up HST (Harmonized Sales Tax) in Microsoft Dynamics 365 Business Central

Introduction
Managing taxes correctly is a critical part of financial compliance. For Canadian businesses, the Harmonized Sales Tax (HST) is applied in certain provinces and must be configured accurately in Microsoft Dynamics 365 Business Central. This step-by-step guide will walk you through how to set up HST in Business Central, from tax group creation to transaction posting.




Step 1: Configure Tax Jurisdictions
 1.  Navigate to Search and search for Tax Jurisdictions
 2. Click on “New”        
 




Details to be maintained include:
  • Tax Jurisdictions – Define the applicable jurisdictions for HST.
  • Code – Assign a unique code for easy identification.
  • Description – Provide a clear description of the jurisdiction.
  • Tax Account (Purchase) – Specify the G/L account for input tax on purchases.
  • Tax Account (Sale) – Specify the G/L account for output tax on sales.
  • Reports to Jurisdictions – Set up reporting relationships where required.
  • Country/Region Codes – Link the jurisdiction to the relevant country or region.



Step 2: Define the Tax Area Codes
1. Navigate to “Tax Areas”
2. Click on “New”.


 
Include the Code, Description, and Country/Region, along with line-level details for the applicable Tax Jurisdictions and their respective calculation order.



Step 3: Create Tax Groups
1. Go to Tax Groups
2. Click on “New” and create a tax group that will be linked to items or services.






Specify the Tax Group details and assign the applicable percentage within the Tax Jurisdictions by selecting the Details action under Tax Jurisdictions.



Step 4:  Assign Tax Ares Codes to Customers & Vendors.
1. Open a Customer Card or Vendor Card.
2.  In the Invoicing FastTab, assign the Tax Area Code relevant to their provision.
3.  Ensure that the Tax Liable field is enabled if the customer/vendor is subject to HST.




Use Case: Implementing HST in Business Central
  1. Business Scenario
    A Canadian company operates across multiple provinces and needs to comply with Harmonized Sales Tax (HST) regulations. The finance team wants to automate tax calculations in Business Central to ensure accurate invoicing and reporting.
  2. Solution in Business Central
    By configuring HST in Business Central, the company was able to:
    1. Define Tax Jurisdictions for each province.
    2. Create Tax Groups and assign them to items and services.
    3. Set up Tax Details with applicable HST rates.
    4. Automatically apply HST when creating Sales Invoices, Purchase Invoices, and Credit Memos.





Conclusion:
Implementing HST in Microsoft Dynamics 365 Business Central not only ensures compliance with Canadian tax regulations but also simplifies day-to-day financial operations. By following a structured, step-by-step configuration, organizations can automate tax calculations, reduce manual errors, and maintain accurate financial records. This approach not only saves time but also provides finance teams with confidence in handling complex tax scenarios. Ultimately, the proper setup of HST empowers businesses to focus more on growth while ensuring their tax reporting remains precise and compliant.



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