The Based On button is used to select the value from which the tax is to be calculated. If Tax By is set to percent, the options are: Price, Base Price, List Price, or Cost. If Tax By is set to dollar amount, the options are either Quantity or Per Line.
The Based On setting can be useful if selling discounted products and collecting sales taxes based on the non-discounted price (e.g., cell phone stores that discount phones in exchange for a specified cellular service contract). Options include: Price (which includes line item discounts, manually entered prices, etc.), Base Price, List Price, or Cost. If the Based On setting is set to Price, the tax is calculated based on the selling price after any discount are entered during the Transaction. If Based On is set to any other option, the tax is calculated based on the field's value before discounts are applied.
If the Tax Amount is a percentage, the percentage is multiplied by the Based On Amount. If the Tax Amount is a dollar amount, the Based On setting is ignored and the dollar amount is added to the transaction.
Note: When enabled, the Minimum Purchase and Allow SubTotal on Receipts settings cause the Based On setting to be ignored as well (and the actual Price charged is used for the tax calculations).
Note: If Based On is set to anything other than Price, do not enable the Taxable by Other Formulas setting. Unless the local taxing authority requires tax to be assessed on taxes imposed by other districts (e.g., some areas of Canada), the Taxable by Other Formulas setting should be disabled under almost all circumstances. If Taxable by Other Formulas must be enabled, the Based On setting should be set to Price.
See:
Tax Tables - General Information
Configuration Manager Contents