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.

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.

There are two core concepts to understand when configuring taxes for your store, Tax Classes and Tax Rates.

Tax Rates

Tax Rates calculate tax on orders based on the customer’s billing or shipping addresses in your taxable jurisdictions.

Tax Classes

Tax Classes allow for the segregation of products into different taxable categories, so that different tax rates can be applied on various products within a customer’s order.

How Tax is Determined

The apportioned tax is calculated by the relationship between:

1. Product

2. Tax Class

3. Order (Shipping or Billing) Address

4. Tax Rate

Tax Settings

Access the Settings > Tax Settings menu to enable sales tax options, to suit your business needs based on your tax obligations.

💡 Pricing Policy

This option determines 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 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 to the order.

<tax 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 $100.00

Setting Up Tax Rates

To set up a Tax Rate, navigate to Settings > Tax where you’ll find the list of all configured Tax Rates in your store.

Creating a Tax Rate

When setting up a rate, follow the options to configure which Products (Tax Class) and Orders it should apply to.

• Tax Class - Apply this tax rate to Products within this Tax Class.

• Name - Internal name used for administrative and reporting purposes.

• Country - Order address country to apply tax rate.

• Postcode - Order address postcode(s) to apply tax rate

• State/Province - Order address state(s)/province(s) for which to apply the tax rate

• City - Order address city to apply the tax rate

• Rate % - Tax rate percentage to apply to the order items.

• Display Name - Name of the tax shown to customers, ie VAT, GST, or Sales Tax.

• Priority - Priority for this tax rate to be applied in cases of conflict between multiple tax rates matching.

• Compound - Allow this tax rate to combine with other tax rates, such as state and local taxes.

• Shipping - Apply the tax rate to shipping fees.

Setting Up Tax Classes

Tax Classes provide a method to categorize your products according to their tax classifications. This allows you to create multiple Tax Rates configured to match customers' address parameters with the appropriate tax rates they should be charged.

Creating a Tax Class

• Name - Name used internally to identify the Tax Class for administrative and reporting purposes.

• Description - Description of the Tax Class.

Tax Reporting

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