Region Based Taxation means that you will be able to set a different tax rate for each different region that you ship to. If you did not specify region based taxation in the setup wizard, you can access the tax wizard by selecting Tax Options from the Options menu and clicking the Edit button. Follow these instructions to set up Region Based Taxation.
You can navigate forward and back through the wizard using the Next and Back buttons at the bottom of the wizard. You can start the interactive help option at any time by pressing the Help button on each page of the wizard.
Select Region Based Taxation. Click Next to continue.
Enter the tax rate for each region. To enter a tax rate highlight the name of the region and enter the tax rate in the "Tax Rate" field. If you do not want to charge tax in a particular region, do not assign a tax rate to it. Click Next to continue.
Enter the tax rate that will applied to your shipping charges. This can be used to set the tax rate on the shipping component of the customer's order. Click Next to continue.
You have finished setting up Region Based Taxation. The tax rate for each product can be entered in the tax field on the Inventory tab.