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Sales tax posting error: VAT Calculation Type must be “Normal Tax”

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Posted on by CU21072046-0

Hello,

We recently started charging customers sales tax in Microsoft Dynamics 365 Business Central.

When we try to post a sales invoice for a tax-liable customer, we receive this error:

VAT Calculation Type must be equal to 'Normal Tax' in Gen. Journal Line. Current value is 'Sales Tax'.

The customer has a Tax Area Code, the sales lines have Tax Group Codes, and Tax Details are set up.

The invoice only posts when we change the customer to not tax liable, but that removes the sales tax. We need the tax to calculate and post on the same invoice as the taxable items.

What setup should we review to fix the VAT Calculation Type mismatch?

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Teagen Boll 3,414 Super User 2026 Season 1 on at

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Hi, are you in the US or Canada or in the EU?

If you're in the US/Canada you don't need to setup VAT Groups at all. Delete any VAT Prod. Groups and Bus. Groups and then simply just set the Tax Posting Setup page as Sales Tax. None of your master data should have VAT groups assigned.

Then sales taxes calculate normally. You don't need any special VAT requirements for configuration. If you have any purchase or sales lines you may need to delete them and recreate them.

If you're outside the US/Canada you need to set your VAT Calculation type as Normal VAT/Tax or Full VAT/Tax. It will depend on your countries requirements. You may need to work with a local partner or consult other material such as this: Walkthrough of fields in the VAT Posting Setup - Dynamics 365 Business Central

With any tax posting setup its usually also recommended to work closely with a partner so they can configure it correctly.

Best,

Teagen Boll

Work: Catapult ERP

Social: LinkedIn

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