How to Set Up Use Tax on Purchases in Business Central

This page covers two paths, chosen by the "Enable CereTax on Purchase Transactions" setting in CereTax. If you do not use CereTax, follow Set Up Native Use Tax and Check and Post the Purchase Document. With "Enable CereTax on Purchase Transactions" off, Business Central uses its standard sales tax functionality. The native steps create a Tax Details entry with a Tax Type, fill in the tax area fields on the company, the location, and the purchase order, then review the purchase on the Statistics page and in Preview Posting before you post it. With the setting on, set the codes CereTax needs, pick the use tax posting account, and read the result in the CereTax Sales Tax Log. Follow Set Up CereTax for Purchase Transactions and Read the Result in CereTax.

Who This Applies To

Microsoft defines use tax in the United States as a sales tax on items a company buys and uses itself instead of selling to a customer. The company pays sales tax on those items to the government as use tax. Microsoft supplies the fields, and your company decides which purchases owe use tax. This page does not say which ones do.

If you do not use CereTax, follow Set Up Native Use Tax and Check and Post the Purchase Document. With "Enable CereTax on Purchase Transactions" off, Business Central uses its standard sales tax functionality. When the setting is on, Business Central uses CereTax to calculate tax. Follow Set Up CereTax for Purchase Transactions and Read the Result in CereTax.

Before You Start

• These steps use the US version of Business Central. Microsoft supports sales tax in Business Central in the United States and Canada only.
• The native steps follow Microsoft's Set Up Use Tax and Purchase Tax [US] article. That article also lists a Provincial Tax Area Code field on the purchase order, company, and location pages. This page leaves that field out.
• On the native path, Microsoft says you must assign tax group codes to inventory items and general ledger accounts. Microsoft's Set up sales tax assisted setup guide includes specifying the accounts that you want to use for sales tax for sales and purchases.
• The native part covers Microsoft's fields and steps, then posting and two checks. It does not cover which purchases owe use tax, rates, or reporting use tax on a return.
• The CereTax setup steps need CT_Admin permissions. Our Business Central integration is available through Microsoft AppSource.

Set Up Native Use Tax

1. Open Tax Details, choose New, and fill in Tax Jurisdiction Code, Tax Group Code, and Tax Type. Microsoft lists four Tax Type values: Sales and Use Tax applies both taxes, Excise Tax applies excise tax, Sales Tax Only applies sales tax only, and Use Tax Only applies use tax only. Your company chooses the value.
2. If the tax you pay is not recoverable, select the Expense/Capitalize check box on the new entry. Microsoft says the box must be selected in that case.
3. Open Company Information and fill in the Tax FastTab fields Tax Area Code and Tax Exemption No. Microsoft says the tax area code works with the tax group code field and the Tax Liable field to find the information for calculating sales tax.
4. Open Locations, select a location, choose Edit, and fill in the General FastTab fields Do Not Use For Tax Calculation, Tax Area Code, and Tax Exemption No. Do Not Use For Tax Calculation specifies whether the location's tax information is used for sales tax calculations on purchase documents.
5. Open Purchase Orders, choose New, and fill in the Lines FastTab. Microsoft says Tax Liable, Tax Area Code, and Tax Exemption No. are available on the Purchase Header page but are not shown by default, so add the column that shows each field before you select it. Then fill in these Invoicing FastTab fields: Tax Liable, Tax Area Code (the tax area code of the vendor), and Tax Exemption No., which takes up to 30 alphanumeric characters. Choose OK.

Check and Post the Purchase Document

1. Open the Statistics page to check the amounts before you post. It takes the rounding calculations for value-added tax (VAT) or sales tax into account. Choosing Release also updates the totals fields to include rounding.
2. Choose Preview Posting. Microsoft says it validates the document and shows the expected ledger entries. Compare those entries with the tax setup you entered above.
3. Choose Post. Posting a purchase document updates the vendor account, the general ledger (G/L), and the item and resource ledger entries.

Microsoft's articles on use tax setup, the Tax Jurisdiction table, and basic US tax setup do not describe the G/L entry that a use tax purchase posting creates. The two checks above are Microsoft's general purchase document checks, so read the result against the tax setup you chose.

Set Up CereTax for Purchase Transactions

These steps are for the path where "Enable CereTax on Purchase Transactions" is on. Step 1 sets it.

1. In the CereTax Integration Setup, set "Enable CereTax on Purchase Transactions" to ON.
2. Create a Default Tax Area Code and a Default Tax Group Code, both with the code CERETAX. Confirm that "Use External Tax Engine" is OFF on the tax area. Create a tax jurisdiction with the code CERETAX and its tax account, and assign it to the CERETAX tax area code.
3. On each vendor's Vendor Card, open the Invoicing tab and set the Tax Area Code to CERETAX. When CereTax is enabled for purchases, we require this code on every vendor.
4. Set the Tax Group Code to CERETAX on every item, G/L account, resource, and fixed asset you use on transactions. We require this code for tax to calculate correctly.
5. On the GL Posting tab of the CereTax Integration Setup, select the Use Tax GL Posting Account. This is the GL Posting Account for posting tax entries for Use Tax on purchase transactions. If CereTax does not calculate tax on purchases, you do not need to select one.

Read the Result in CereTax

CereTax calculates tax on a purchase transaction when you open the Statistics page, release the document, run Preview Posting, or post the document.

On Business Central platform v28 or later, use the CereTax Statistics button on Purchase Quotes, Purchase Invoices, and Purchase Credit Memos. Our release 1.0.0.33, dated June 15, 2026, adds the CereTax Statistics button, and the button is required only on platform v28 or later.

After CereTax calculates tax, open the CereTax menu on the transaction and select "CereTax Sales Tax Log." The log shows a detailed breakdown of tax for every line on the transaction. For a record of each request, open Logs from the CereTax menu. Each transaction log shows the Business Central document number and the CereTax transaction ID, plus other details and any errors.

How CereTax P2P Handles Vendor Invoices

CereTax connects to purchasing platforms, including Dynamics 365 Business Central, through an application programming interface (API) or batch upload, and return results to the record your team already works in.

CereTax evaluates each vendor invoice line as it enters accounts payable (AP), before the invoice posts. For each line it returns one of three answers: the vendor charged the right tax, the vendor charged tax that was not due, or the vendor charged no tax on a taxable purchase and use tax must be accrued. CereTax P2P returns the result with the tax code and rate and records the accrual for the general ledger account you specify.

Next Step

Learn how CereTax handles use tax on purchases.