e-Commerce Tax Setup
If you are required to collect/charge sales tax or value added taxes (VAT), here is how to set this up.
- Add a Tax Class using the 'Manage Tax Classes' link
- A 'Tax Class' is simply a tag to be assigned to a product to establish is 'taxing type'. You might simply use 'VAT' or 'Taxable'. If there are different tax rates for a particular area based on the type of product being sold, you should create a "Tax Class' for each type.
- Create Tax Zones using the 'Manage Tax Zones' link
- A 'Tax Zone' is a country and region where the tax would apply. You also provide a store specific 'Name' to that country/region. You may require several Tax Zones based on your customers locations and what your sales tax or Value Added Tax requirements are. In the United States, many companies are only required to collect sales tax when shipping to a destination within a state where they hold property. For example, if the 'store' is in Indiana, you would only need to create a Tax Zone named IN for US/Indiana. (Note this example is subject to change due to changing requirements in regards to sales tax from online activities)
- Create Tax Rates using the Tax Manager
- You must already have created at least one Tax Class and one Tax Zone. You can add a Tax Class or Tax Zone from the Edit Tax Rate view if needed.
- Select the product Tax Class, select the destination Tax Zone, and then enter the tax Percentage Rate. E.g., a class of Taxable, a zone of IN and a rate of 7.
- You also need to change settings if this tax zone requires the shipping cost also be taxed, or if it is an origin based sales tax (as opposed to destination based). You may also 'disable' this tax rate.
- You should create a Tax Rate for each Tax Class and for each Tax Zone you are required to collect taxes with.
- For the process to be complete, you must assign the 'Tax Class' to your product for the tax to be assessed (added) during the ordering process. Only ONE (1) 'Tax Class' may be assigned to a product.
- NOTE: the e-Commerce system only deals with Tax Zones by country and region/state, NOT by zip code.