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Tax Calculations in D365 CE (CRM/FS)

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How does tax calculations work in D365 CE (CRM/FS)? I know there are tax rate tables and tax groups, but not clear on how D365 CE determines whether an item is taxable or not, based on the type of product it is, and where the sales transaction is occurring so that accurate local, state, and federal tax can be calculated.

Anyone can help with this?


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