brotherton-erpnext/erpnext/docs/user/guides/accounts/setup/tax-rule.md
2015-11-09 14:40:34 +05:30

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You can define which [Tax Template](/contents/setting-up/setting-up-taxes) must be applied on a Sales / Purchase transaction using Tax Rule.
<img class="screenshot" alt="Tax Rule" src="assets/img/accounts/tax-rule.png">
You can define Tax Rules for Sales or Purchase Taxes.
While making a Transaction the system will select and apply tax template based on the tax rule defined.
The system selects Tax Rule with maximum matching Filters.
Let us consider a senario to understand Tax Rule Better.
Suppose we define 2 Tax Rules as below.
<img class="screenshot" alt="Tax Rule" src="assets/img/accounts/tax-rule-1.png">
<img class="screenshot" alt="Tax Rule" src="assets/img/accounts/tax-rule-2.png">
Here Tax Rule 1 has Billing Country as India and Tax Rule 2 has Billing Country as United Kingdom
Now supposed we try to create a Sales Order for a customer whose default Billing Country is India, system shall select Tax Rule 1.
In case the customers Billing Country was United Kingdom, the system would have selected Tax Rule 2.