---
title: "Setting Up Taxes\n"
space: "ERPNext"
url: "https://docs.frappe.io/erpnext/setting-up-taxes"
updated: "2026-02-27"
---

**Taxes are compulsory contributions to the state/country revenue.**

One of the primary motivators for compulsory use of accounting tools is the  
calculation of taxes. ERPNext allows you to make configurable tax templates that you can apply to your sales or  
purchase transactions.

## 1. Tax Accounts

For Tax Accounts that you want to use in the tax templates, go to:  
> Home > Accounting > Chart of Accounts

Select an account and click on edit. Select the 'Account Type' as 'Tax' for the account.

## 2. Sales Taxes and Charges Template

Sales Taxes and Charges Template fetched taxes for your sales transactions like [Sales Order](/erpnext/sales-order) and [Sales Invoice](/erpnext/sales-invoice).  
Read [Sales Taxes and Charges Template](/erpnext/sales-taxes-and-charges-template) to know more.

## 3. Purchase Taxes and Charges Template

Purchase Taxes and Charges Template fetched taxes for your sales transactions like [Purchase Order](/erpnext/purchase-order) and [Purchase Invoice](/erpnext/purchase-invoice).  
Read [Purchase Taxes and Charges Template](/erpnext/purchase-taxes-and-charges-template) to know more.

## 4. Item Tax Template

The tax set in Item Tax Template applies specifically to an [Item](/erpnext/item) or an [Item Group](/erpnext/item-group). It is given preference over the Sales/Purchase Tax Template.  
Read [Item Tax Template](/erpnext/item-tax-template) to know more.

## 5. Tax Category

Tax category helps in automatically applying sales/purchase tax templates in your transactions based on the customer/supplier chosen.  
Read [Tax Category](/erpnext/tax-category) to know more.