The correct answer is to assign appropriate Sales tax groups and Item sales tax groups. This is because in Dynamics 365 Finance, the tax code applied to a purchase order is not set directly on the transaction but is instead determined by the combination of the Sales tax group (linked to the vendor) and the Item sales tax group (linked to the product). When these groups are configured correctly, the system automatically enforces the correct tax codes based on the vendor and item, preventing manual errors. On the MB-920 exam, this question tests your understanding of how tax setup flows through the procurement process, and a common trap is confusing direct tax code assignment with group-level configuration—remember, tax codes live inside groups, not on the order itself. A helpful memory tip: think of Sales tax groups as “who” (the vendor) and Item sales tax groups as “what” (the item); together, they lock in the correct tax code.
MB-920 Describe Dynamics 365 Finance Practice Question
This MB-920 practice question tests your understanding of describe dynamics 365 finance. This is a configuration task: choose the command set that satisfies every stated requirement. Small differences — like 'secret' vs 'password' or 'transport input ssh' vs 'all' — change whether the answer is correct. After answering, compare your reasoning against the explanation and wrong-answer breakdown below. Once you have made your selection, read the full explanation to reinforce the concept and understand why each distractor is designed to mislead on exam day.
A company using Dynamics 365 Finance notices that some purchase orders are being created with incorrect tax codes. The tax codes are determined by the vendor and item. What should they configure to enforce correct tax codes?
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Assign appropriate Sales tax groups and Item sales tax groups
Option D is correct because the Sales tax group and Item sales tax group determine the tax code applied. By setting up these groups correctly, the system will automatically select the correct tax code. Option A is wrong because tax codes are assigned to groups, not directly. Option B is wrong because tax authorities are for reporting. Option C is wrong because tax exemptions are for exempt customers.
Key principle: Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
✓
Assign appropriate Sales tax groups and Item sales tax groups
Why this is correct
The combination of Sales tax group (from vendor) and Item sales tax group (from item) determines the tax code used.
Related concept
Read the scenario before looking for a memorised answer.
✗
Set up tax authorities and reporting codes
Why it's wrong here
Tax authorities are for filing and reporting, not for determining tax codes on purchase orders.
✗
Define tax codes for each vendor and each item
Why it's wrong here
Tax codes are not directly assigned to vendors/items; they are assigned through sales tax groups and item sales tax groups.
✗
Configure tax exemption numbers for vendors
Why it's wrong here
Tax exemptions are for customers, not for purchase orders.
Common exam traps
Common exam trap: answer the scenario, not the keyword
Many certification questions include familiar terms but test a specific constraint. Read the exact wording before choosing an answer that is generally true but wrong for this case.
Detailed technical explanation
How to think about this question
This question should be treated as a scenario, not a definition check. Identify the problem, the constraint and the best action. Then compare each option against those facts.
KKey Concepts to Remember
Read the scenario before looking for a memorised answer.
Find the constraint that changes the correct option.
Eliminate answers that are true in general but not in this case.
Use explanations to understand the rule behind the answer.
TExam Day Tips
→Underline the problem statement mentally.
→Watch for words such as best, first, most likely and least administrative effort.
→Review why wrong options are wrong, not only why the correct option is correct.
Key takeaway
Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Real-world example
How this comes up in practice
A cloud solutions architect for a retail company is evaluating services for a new workload. The correct answer here reflects best practice for the specific scenario described — not a general cloud recommendation. Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option. Cloud exam questions reward reading the constraint carefully: the same technology can be right or wrong depending on the use case.
What to study next
Got this wrong? Here's your next step.
Identify which MB-920 exam domain this question belongs to, then review the specific concept being tested. Practise related questions in that domain and focus on understanding why each wrong answer is tempting — not just why the correct answer is right.
Describe Dynamics 365 Finance — This question tests Describe Dynamics 365 Finance — Read the scenario before looking for a memorised answer..
What is the correct answer to this question?
The correct answer is: Assign appropriate Sales tax groups and Item sales tax groups — Option D is correct because the Sales tax group and Item sales tax group determine the tax code applied. By setting up these groups correctly, the system will automatically select the correct tax code. Option A is wrong because tax codes are assigned to groups, not directly. Option B is wrong because tax authorities are for reporting. Option C is wrong because tax exemptions are for exempt customers.
What should I do if I get this MB-920 question wrong?
Identify which MB-920 exam domain this question belongs to, then review the specific concept being tested. Practise related questions in that domain and focus on understanding why each wrong answer is tempting — not just why the correct answer is right.
What is the key concept behind this question?
Read the scenario before looking for a memorised answer.
About these practice questions
Courseiva creates original exam-style practice questions with explanations and wrong-answer analysis. It does not publish real exam questions, exam dumps, or protected exam content. Learn why practice questions differ from exam dumps →
These questions test the same concept from different angles. Work through them to make sure you can recognise it however the exam phrases it.
Variation 1. A retail company using Dynamics 365 Finance notices that sales tax is not being calculated correctly on invoices for cross-border transactions. The tax setup includes multiple tax codes and tax groups. What is the most likely cause?
hard
✓ A.Tax codes are not correctly assigned to the items or customers involved.
B.The tax authority is not configured for cross-border transactions.
C.The ledger posting group for sales tax is set incorrectly.
D.Withholding tax is enabled for the vendor.
Why A: Option B is correct because incorrect assignment of tax codes to items or customers is a common cause of tax calculation errors. Option A is wrong because tax authority setup does not directly affect calculation. Option C is wrong because ledger posting groups affect posting, not calculation. Option D is wrong because withholding tax is separate.
Last reviewed: Jun 21, 2026
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