- Automatic tax calculation
- Manual tax setup
It is possible to create tax setup to charge the proper rates during the checkout. This makes it easier to apply and collect correct rate, report income and comply with the local tax laws.
For users from the US, Canada, Australia and Europe Online store calculates the tax rates automatically based on the store and customer's location. On the checkout the customer will be charged a proper tax rate according to country and regional tax rules.
Tax laws are constantly changing. Country, state or even city government may apply new tax rates that a business owner is expected to keep up with.Online store will stay up to date on the tax law.
1. Enter your actual company address in Control panel on Settings → General page. This address is needed to calculate and apply the right rate to the order on the checkout.
2. Enable automatic taxes in your Control panel → Settings → Taxes page:
Once enabled, the automatic tax rate will determine a precise tax rate at checkout depending on where you and your customer are located. The tool knows the tax rules in your country, state and even county and city and applies them properly to each order:
- Whether you’re located in a region with origin-based or destination-based tax schema
- Whether shipping cost or discounts are taxable
- Whether you should charge tax in another state or country not
The tax rate is calculated with a zip code accuracy. If your customer provide zip+4, it will be calculated with even higher precision. In some states (and the number of such states is growing), the tax is calculated with a street address level precision.
No, there isn't. You have unlimited automatic tax calculations free of charge.
Yes, automatic tax calculator recognizes counties, zip codes and even street addresses (in some states). If your customer provide zip+4, the rate will be calculated with even higher precision.
Automatic tax rates applies for all products by default. In case you do not charge tax for some of your products, or you need multiple taxes, you need to use manual tax setup.
For example you need to create 7.5 % tax for California.
- Open your Control panel.
- Go to the Settings → Zones page. Press the "New Zone" button.
- Change the name of the created destination zone. Then click on the "Add state..." button and add the necessary state (e.g. "United States: California"). Save the changes.
- Go to the Settings → Taxes page.
- Press the "New Tax" button.
- Enter your tax name and define the other settings
- Click on the "New Rate" button. Select the zone created earlier and enter the tax rate(for example 7.5 %). Save the changes.
- If you have many destination zones, repeat step #7 for each of them.
- If you want to set up the same rate for several different states, you can create a zone consisting of these states and set up tax rate for this zone.
- There is also a pre-defined zone named "Other zones" that defines tax for locations matching no zone mentioned in the rate list.
Show detailed taxes
If you have several taxes system will show all of them itemized on the product page, cart page, and in order invoices. You should enable setting "Show detailed taxes everywhere in store" in your Control panel → Settings → General →Migrations.
Tax isn't calculated, if I use PayPal Express Checkout
Most likely your "Zone defines by" tax option is set to "Billing address".
Unfortunately, PayPal does not return customer's billing state code, only the country code. That is why we were unable to calculate the tax, if it's based on the billing address.
Please change the "Zone defines by" option to "Shipping address", it will fix the issue.
If you want to add tax percentage to your invoices, you can add it to the name of your tax here: Control Panel → Settings → Taxes page.
For example, if you have 10% tax, at your invoices it may look like this: 10% Tax: $1,5
Note: a new tax name will be applied only to orders placed after editing.
EU countries like Germany and Italy have certain regulations that impose rules on businesses and require specific display of product prices and sales taxes. We made it possible for EU stores to get their stores fully complied with these regulations. Please refer to this article for detailed information: EU laws: How to setup
Tax calculation algorithm determines which tax to apply by looking through the configured tax rate list, top-down. When it finds a matching zone, it stops and applies the corresponding tax rate. So you can define tax rate for particular state(s) or cities (using zip codes), then add a rate for "USA" at the bottom of the list. In this case, USA rate will be applied to all states except the states configured explicitly.
In the US the merchant must pay the taxes to the states where they have any connections (nexus).
Example 1: You reside in Ohio and sell to all the states, and your office, staff, warehouse, etc are located in Ohio. In this case you must pay the Sales Tax only in Ohio. In all the other states you sell to, it is the customer who is responsible for paying the tax - and it is called "Use Tax", not "Sales Tax".
Example 2: You are a resident of Ohio and your office is in Ohio, but you also have a warehouse in Washington and a lawyer in New-York. In this case you must pay the Sales Tax in all these three states as you have 'nexus' there. The rates will depend on the customers’ location. The Sales Tax for all other states will be zero-rate for you.
What is considered to be “nexus” is set by the State Government.