Automatic tax calculation
For users from the US, Canada, Australia and Europe the 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. We will stay up to date on the tax law.
How to setup
1. Enter your actual company address in the 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.
Manual tax setup
How to setup
You can manually configure your Design-Editor store to calculate tax rates for different regions, zones, countries.
For example you need to create 7.5 % tax for California.
- Open your Design-Editor 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 Design-Editor 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 Design-Editor 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.
How to add tax percentage to invoice?
If you want to add tax percentage to your invoices, you can add it to the name of your tax here: Design-Editor 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.
I am from EU. How can I set up my store to comply EU business regulations?
EU countries like German 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 Design-Editor stores to get their stores fully complied with these regulations. Please refer to this article for detailed information: EU laws: How to setup Design-Editor Store
How to set up tax rate for certain state or city?
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.
Tax Calculation in the US
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.