Not all the products and services have the same tax rate.
There are tax exempt products and there are products or services to which a higher tax rate applied just because the type of product or service.
Tax categories allow to group similar tax rates by having into account that:
- the same tax category can be assigned to more than one product or service, by having into account that it is recommened to split the tax categories by item type.
- every product and service must be linked to one tax category same as each tax rate
therefore when that product or service is entered in an invoice only the tax rate/s which belongs to that tax category will be used to get the applicable tax rate.
- there are other variables which can reduce up to just "one" the correct tax rate to use while entering a product and a business partner in an invoice.
Those variables are related to the business partner tax category as well as the way each tax rate is configured.