In calculation m,we can charge tax on mrp or sale rate in the same bill
For example
Abc item
Mrp - 200
Rate - 100
Tax - 5%
After set calculation m from control room  --one option is active in item master. 
Lst  have 4 option
1. E- excl mrp
  In this tax calculate on mrp as exclusive 
  As above example
  Tax = 200*5/100==10
  Taxable value is 200
2. I - incl  mrp
In this tax calculate on mrp but inclusive
  Tax =  200*5/105 == 9.53
  Taxable value is 190.47 
3. S- excl s/r
 In this tax calculate on sale rate as exclusive 
   Tax = 100*5/100 = 5
    Taxable value is 100
4. W-incl s/r
   In this tax calculate on sale rate as inclusive
  Tax =100*5/105 = 4.76
  Taxable value is 95.24
For help of this calculation customer charge tax on mrp and sale rate in one bill and setting pick from item master, but we can change this setting at the time of billing by press F2 when cursor on qty field.