An efficient tax management system is an integral and key part while setting a store. In whatacart, the tax management system is designed in a way so that it is simple to understand and flexible enough to incorporate even complex tax rules.
Before we set up the taxes, we need to understand the following terms.
- Product Tax Class – Tax class associated with the product. In default installation, taxable goods is provided as a tax class. When a product is created or updated it can be associated to a tax class.
- Customer Group – The groups assigned to customer when signing into the store or assigned by the admin to the customer.
- Tax Zone – Tax zone is identified as a combination of country, state and zip range or zip.
- Tax Rate – Rate of tax in specific tax zone zone. This could be of type percentage/flat. The tax rate with same name for different zones could vary. For example Sales tax rate varies in USA by state.
- Tax Rule – It is a combination of Product Tax Class, Customer Group, Tax Zone and Tax Rate.
Product Tax Classes
- To manage product tax classes, after login into admin panel, click System >> Localization >> Taxes >> Product Tax Classes.
- To manage customer groups, after login into admin panel, click System >> Groups.
- On create select the parent as Customer to create a customer group. If customer is not selected as parent, it would be a simple group.
- To manage tax zones, after login into admin panel, click System >> Localization >> Taxes >> Zones.
- There are two options here with zip while creating tax zone
- Provide a specific zip
- Provide a zip range
- To manage tax rates, after login into admin panel, click System >> Localization >> Taxes >> Tax Rates.
- On create user need to provide name, value, type of tax rate(could be flat or percentage) and zone for which tax rate would apply.
- To manage tax rules, click System >> Localization >> Taxes >> Tax Rules.
- The tax rule would be combination of customer group, product tax class tax rate and tax zone. Each tax rule would be based on billing or shipping.
How Tax is Calculated
For example a customer add a product X to the cart and proceed to checkout. Thus assume
- Product X belong to product class taxable goods
- Customer belong to Retailer customer group
- To calculate tax, we need to choose an address which could be either based on billing address or shipping address. The four addresses used in tax calculation in the system are as follows
- Store Billing Address(Always there)
- Store Shipping Address(Always there)
- Customer Billing Address
- Customer Shipping Address
- If based on is billing address, thus if customer is not guest, customer billing address would be used. If customer billing address is not there customer shipping address would be used. If customer shipping address is not there than store billing address else store shipping address would be used as address for tax calculation.
- Based on the chosen address, tax zone would be derived out. Assume tax zone derived is Alabama.
- Based on above parameters derived(product tax class, customer groups, zone), tax rules that would be applicable are found out. The sample tax rules data would be as follows
|Product Tax Class||Customer Group||Tax Zone||Tax Rate||Tax rate Value||Tax rate type|
|taxable goods||Retailer||Alabama||Sales Tax||4||percentage|
|taxable goods||Retailer||Alabama||Local Tax||2||flat|
- Assuming the cost of product X to be USD 10, the total tax applicable are
- Sales Tax -> 10 *.04 = 0.4 USD
- Local Tax -> 2 USD
- Total tax = 0.4 + 2 = 2.4 USD
In case of any queries, please drop an email to firstname.lastname@example.org.