Tax Settings

Calculate, collect, and report on sales tax

Sales Tax

As a merchant, you may need to calculate and charge sales taxes on your orders. Configuring your store to automatically handle most common sales tax calculations will provide you with the reports needed for accounting and tax remittance.

Head to Settings > Taxes to set up Tax for your store.

In addition to the built-in sales tax features, Next Commerce supports Avalara AvaTax and TaxJar as installable Apps for automated tax calculation and reporting. When a supported Tax App is installed, all calculation and configuration is handled by the App, with no need for manual Taxes Settings configuration.

There are two core concepts in NEXT related to Tax - Tax Regions and Tax Rates.

Tax Regions

NEXT supports regional tax settings, where each region can be assigned the following:

• Federal Tax Rate

• State Tax Rate

• Override Product Tax Rate

Tax rates will be automatically applied to all order line items with shippable products.

Tax Rates

Tax Rates are simply the percentage rates used to calculate tax on orders based on the customer’s shipping address (or billing address for digital products) in your taxable regions.

How Tax is Determined

The apportioned tax is calculated by the relationship between:

1. Product Category (if override is applied)

2. Order Shipping Address (or Billing Address for digital products)

3. Tax Rate

Configure Taxes

Access the sales tax configuration for your store from Settings > Taxes.

To start, set up a Tax Region by selecting Add Tax Region. Then select the Tax Region from the listed options - these correspond to the available regions configured via Settings > Localization.

Now that your tax region is created, the following options are available:

• Add Tax Rate

• Add Tax Rate Override

Add Tax Rate

Choose Add Tax Rate and define the following values:

• State/Province - defaults to "*" (all) which applies the rate federally.

• Rate (%) - the rate of tax to charge

• Display Name - the name that will appear on customer checkouts and receipts on the tax line item

• Shipping - choose whether to apply tax to shipping fees

• Compound - choose whether to combine this tax rate with other tax rates

To add an additional tax rate to the region, such as a tax rate conditional to certain states or provinces, repeat the above steps and define a list in the State/Province field separated by "|"

Add Tax Rate Override

To create a tax rate that overrides the store's taxes settings, choose Add Tax Rate Override.

• Override tax rates can be set on a Product Category.

• The override tax rate applies to any order line item containing a product in the category specified.

• Override tax rate does not compound with other tax rates.

Tax is calculated after applying discounts. For example, if a product price is 100 with a 10% discount, the discounted price becomes 90. Tax is calculated based on the price of 90 instead of 100.

Tax Settings

Global settings define how tax is calculated and appears to your store's customers.

Tax Calculation

These options determine how prices are presented to your customers, and thus how tax amounts will be calculated for orders.

Prices that are inclusive of tax means that the price displayed to the customer includes tax, and tax amounts will be included in the order totals.

<tax inclusive calculation example>

Tax Amount = product price - (product price / (( tax% / 100) +1))
price_incl_tax = product price
price_excl_tax = product price - tax

For example, if the product price is $100.00 and the Tax Rate is set at 20%, the tax amount will be $16.67. So the price inclusive of tax will be $100.00 and the price excluding tax will be $83.33

Prices that are exclusive of tax means that the price displayed to the customer excludes tax, and tax amounts will be applied as an additional charge on top of the order.

<tax exclusive calculation example>

Tax Amount = (product price * tax)% / 100
price_incl_tax = product price + tax
price_excl_tax = product price 

For example, if the product price is $100.00 and the Tax Rate is set at 20%, the tax amount will be $20.00. So the price inclusive of tax will be $120.00 and the price excluding tax will be $100.0

Use the Charge Tax on Digital Products global setting to include or exclude tax being applied to digital products.

Recommended Settings

1. Federal Tax only → When only a country-level tax is needed

2. State Taxes only → When only state-level taxes are needed

3. Federal Tax (compound) + State Tax (compound) → When you need the federal tax to be combined with the state tax.

4. Federal Tax (compound) + State Tax (not compound) → When you need a specific state tax instead of the federal tax

5. Override Product Tax + any Federal/State Tax setting → When you need a specific tax rate for certain products, regardless of other tax settings.

Tax Reporting

For a summary of all tax collected by tax rate see Tax Reports