Take a look at prepayments in Order Entry. 

Overview

Use the O/E Prepayments screen to enter, modify, and delete prepayments with an order, shipment, or invoice, or to process or void a credit card prepayment if you use Payment Processing.

Before entering a prepayment, you should determine which Accounts Receivable receipt batch to use for the prepayment.

Prepayments are applied to transactions as follows:

• Prepayments entered with orders do not reduce the amount of the next invoice you create. Instead, they are matched to invoices when they are posted in Accounts Receivable (using the order number).
• Prepayments entered with invoices immediately reduce the amount due on the invoices sent to customers, and are matched to invoices posted to Accounts Receivable.

The order prepayment total is displayed on the Totals tab of the O/E Invoices screen, so you can easily determine if there is an outstanding balance.

Note: You can enter multiple prepayments for an order, but only one prepayment for an invoice.

Hi,

Thank you for your reply.

I have gone through the documentation on Prepayment part, but I do not see any chance to records prepayment with tax, is that true?

Our tax law only takes the tax from the invoice, so I am not sure how your tax system works. We allocate the entire prepayment to the document.

Hi,

Thank you for your reply.

Tax law in my country requires the down payment to be tax deductible. That is why I need to settle the down payment and the respective tax in sales invoice (for the shipped goods)

Here is the illustration:

Invoice for down payment (DP) of 10000 order amount
AR      3300
    DP          3000
    Tax (10%) 300

Receive DP from Customer
     AR         3300
Bank    3300

Sales Invoice
AR       7700
DP       3000
     Rev       10000
     Tax (10%) 700

Receive Payment from Customer
     AR           7700
Bank    7700

Thank you