Tax Settings

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Shopping cart tax calculation module is used to calculate taxes applied at the time of sale. The general principles of tax assessment and guidelines for customizing the tax calculation module are provided below.

Introduction

In most countries, a sales tax is applied to the sale of a product or service. The sales tax has a different name in each country. It is called a Sales and Use Tax in the United States and a Value Added Tax (VAT) in the European Union. In Canada, the Goods and Services Tax (GST) is levied at the federal level and a Provincial Sales Tax (PST) at the level of provinces. Also, several Canadian provinces use a Harmonized Sales Text (HST) in place of both GST and PST.

The sales tax may have different names in other countries; however, shopping cart software provides support for calculating taxes applied at the time of sale for the majority of world countries.

Principles of Tax Assessment in Internet Sales

Shopping Cart software is designed for selling goods on the Internet. In most countries, Internet sales of goods and services are taxed the same way as store sales or mail-order sales.

Depending on local legislation, the following items sold on the Internet may be subject to taxation:

  1. product being sold
  2. product packaging
  3. product shipping services

These taxes may also depend on the customer's and merchant's locations.

Shopping Cart Tax Module Features

Tax calculation module meets the majority of tax assessment requirements applicable to Internet sales. Its features include the following:

  1. Calculates product sales taxes with regard to the recipient's location (the entity that receives the shipment);
  2. Calculates product sales taxes with regard to the recipient's ZIP/Postal Code;
  3. Calculates product sales taxes with regard to the payer's location (the entity that pays for the order);
  4. Calculates individual taxes for each product sold with regard to the tax rate;
  5. Supports an unlimited number of taxes;
  6. Supports an unlimited number of tax rates for the same tax;
  7. Calculates taxes for simultaneous purchase of products spanning several product classes;
  8. Calculates taxes applied to shipping cost, if applicable;
  9. Calculates taxes applied to shipping cost with regard to delivery method;
  10. Calculates intedependent taxes whenever two or more tax amounts depend on each other.


Taxes Page Sections

The Taxes page includes several sections described below.

Tax Names

Tax Display Options

Tax Classes

Tax Rates

Tax Rules on Shipping Cost

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Tax Names This section is used for creating, editing and deleting taxes. You can create as many taxes as you like. In this section you define only a tax name and address type to which the tax applies. Rules for calculating tax amounts for taxes you have created are defined separately for each Tax Class in the Tax Rates sections below.

Click the Add button to create a new tax. A new dialog opens where you can enter the tax name and the type of address to which it will be applied. For example, if you specify that the tax applies to Shipping Address, then only the recipient's address will be taken into account for tax calculation purposes, regardless of the payer's address (Billing Address). Shipping Address is entered by the customer at the time of purchase.

If you specify that the tax applies to Billing Address, then the tax amount will be calculated only based on the payer's address, regardless of the shipping location.

Using the Billing or Shipping Addresses for tax calculation depends on the tax jurisdiction where your business is registered. For example, in most of the United States no tax is charged if an article is shipped outside the state. However, if the article is shipped within the state, a tax is charged even if the payer is located in another state.

Check "Included Into Product Price" if the prices you enter for products in this tax category include the tax.

To edit or delete a previously created tax, select it with a checkbox on the right and then click the Edit or Delete buttons, respectively.


Tax Display Options

This section defines the rules for displaying taxes to customers on the checkout pages.

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After a new tax has been added to the Tax Names list, the corresponding display option is added to the list automatically for your convenience. However, these sections are not hard-connected; you can change the display options independently of the taxes themselves.

The Tax & Display Rules column shows the tax name and the rule for displaying the tax. The Displayed Text column shows the text that customers will see in front of this tax amount on the checkout pages. You can enter different Displayed Text for different languages using the language selector.

To add a new displayed tax, click the Add button. A window will open where you can specify which tax amount should be displayed, and when:

Always display The corresponding line will be shown regardless of the calculated tax amount (if no tax is applicable, a zero will be displayed).
Display if applicable The corresponding line will be shown only if the tax amount is positive after all calculations.
Never display The corresponding line will never be shown. This setting is identical to if you delete the display option completely. The tax amount will still be added

to the total order amount and displayed in the "Order total:" line.

Several tax amounts can be added up and displayed as one sum, for example under the label "Taxes total:". Use the Add button to add any existing taxes to the line. In this case it is recommended that you set the display option to Always display. Otherwise, if any of the specified tax amounts will equal zero, the whole line will not be displayed.

To edit or delete a previously created display option, first select it with a checkbox on the right, then click the Edit or Delete buttons, respectively.


Tax Classes

A tax is a set of rules for tax rate calculation. If different types of products in your sore are taxed at different rates, you should create a separate Tax Class for each product type and then set them for the products accordingly. You can select a Tax Class for a product from the list of available classes when adding or editing the product attributes (Catalog > Manage Products).

Two default tax classes already exist after installation: Taxable and Nontaxable. However, they contain no tax calculation rules.

This section provides only the names and descriptions of tax classes. To define the rules of tax calculation for each class in the list, use the Tax Rates section below that corresponds to that class.

Use the Add, Edit and Delete buttons to add, edit or delete tax classes, respectively (you may need to select the right class with a checkbox first).


Tax Rates

For each tax class entered there is a corresponding Tax Rates section containing the rules for tax calculation. If more than one tax is defined for the same type of address, the taxes are added together.

The total tax amount is defined as the sum of all tax calculations of a tax class.

Use the Add, Edit and Delete buttons to add, edit or delete the calculation rules, respectively (you may need to select the right class with a checkbox first).


Tax Rules on Shipping Cost

Depending on your tax jurisdiction's legislation, a tax can be charged on the cost of shipping of an article to the customer. This section lets you define the rules for calculating tax amounts applied to product shipping prices depending of the selected delivery method.

In most US states, shipping is taxed if the delivery is made using the merchant's means of transportation. If shipping is done by a third party (UPS, USPS, DHL, etc), the shipping cost is not taxed.

To set the nontaxable shipping methods, click the Edit button. A window will open where you can select the nontaxable methods. After your choice is saved, the selected nontaxable methods will be listed in this section.

This page has no general Save button because all of the above changes are saved immediately.