Quick Answer
The answer is the Sales tax codes module. In Dynamics 365 Finance, VAT rates setup for multiple jurisdictions is performed through sales tax codes, which are configured within the Tax module, not in General ledger, Accounts payable, or Inventory management. Each sales tax code defines the specific tax rate and calculation method for a given jurisdiction, making it the centralized location for all VAT rate configuration across the system. On the Microsoft Dynamics 365 Fundamentals ERP MB-920 exam, this question tests your understanding of where tax setup lives versus where transactions are posted—a common trap is confusing the Tax module with General ledger parameters. Remember that all tax rates, including VAT, are always managed through sales tax codes, not through ledger or vendor setup. A helpful memory tip: think of sales tax codes as the “rate cards” for each tax authority, and the Tax module as the filing cabinet where those cards are stored.
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 uses Dynamics 365 Finance. The tax accountant needs to configure value-added tax (VAT) codes for multiple jurisdictions. Where should they set up the VAT rates?
General ledger parameters
Why wrong: General ledger parameters set up the chart of accounts, not tax rates.
Accounts payable parameters
Why wrong: Accounts payable parameters are for payment terms and vendor settings.
Inventory management parameters
Why wrong: Inventory parameters handle inventory settings, not tax.
Sales tax codes
Sales tax codes define the tax rates and calculation methods.
Answer choices
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
Sales tax codes
In Dynamics 365 Finance, value-added tax (VAT) rates are configured using sales tax codes, which are set up in the Tax module, not in General ledger, Accounts payable, or Inventory management parameters. The sales tax code defines the tax rate and calculation method for each jurisdiction, and it is the standard location for VAT rate setup across all modules.
Key principle: Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Answer analysis
For each option: why learners choose it and why it is or isn't the right answer here.
General ledger parameters
Why it's wrong here
General ledger parameters set up the chart of accounts, not tax rates.
Accounts payable parameters
Why it's wrong here
Accounts payable parameters are for payment terms and vendor settings.
Inventory management parameters
Why it's wrong here
Inventory parameters handle inventory settings, not tax.
Sales tax codes
Why this is correct
Sales tax codes define the tax rates and calculation methods.
Related concept
Read the scenario before looking for a memorised answer.
Common exam traps
The trap here is that candidates confuse 'Sales tax codes' with a US-only concept, but in Dynamics 365 Finance, 'Sales tax' is the generic term for all consumption taxes including VAT, and the setup is always done via sales tax codes, not module parameters.
Detailed technical explanation
Sales tax codes in Dynamics 365 Finance are stored in the Tax module and can be linked to sales tax groups and item sales tax groups to determine the applicable rate per transaction. Each sales tax code can have multiple rate values (e.g., for different date ranges or thresholds), and the system uses the code to calculate tax during invoicing, supporting complex multi-jurisdictional VAT scenarios like EU cross-border trade.
Key takeaway
Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Real-world example
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.
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FAQ
Describe Dynamics 365 Finance — This question tests Describe Dynamics 365 Finance — Read the scenario before looking for a memorised answer..
The correct answer is: Sales tax codes — In Dynamics 365 Finance, value-added tax (VAT) rates are configured using sales tax codes, which are set up in the Tax module, not in General ledger, Accounts payable, or Inventory management parameters. The sales tax code defines the tax rate and calculation method for each jurisdiction, and it is the standard location for VAT rate setup across all modules.
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Read the scenario before looking for a memorised answer.
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Last reviewed: Jun 24, 2026
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