Sales Tax

Sales tax calculations are always tricky because every government around the world seems to apply it in different ways. In many cases the cart has to rely on customer input to decide whether tax is applied to an order or not. Most people don't like paying tax and try to aviod it if they can so there is an argument that, if you can, it is better to use tax inclusive pricing.

WHAT RATE?

There are two bases on which the rate of tax can be set:

1. A fixed rate set in Admin which is applied to all products.
2. An individual rate you set in your Buy Now buttons for each product.

With the second basis you need to add a field named tax to your Buy Now buttons with the value equal to the percentage tax rate for that product. For example; if the rate is 10% then set tax=10 in its Buy Now button. A rate of tax=0 in your Buy Now button will mean no tax for that item. This is the default value, when no tax field is present.

With both bases, shipping is taxed using the rate you enter in Admin and the value of Discounts will reduce the tax total by that rate as well.

WHICH ORDERS SHOULD BE TAXED?

Tax is applied to an order on the basis of one of eight different criteria. You have to choose which is most appropriate for your situation.

1. All orders.
   In this case tax is calculated and added to all orders.
2. Check box
   With this option an extra check box is added to the cart. If your customer checks this field then tax will be calculated.
3. Shipping zone.
   Tax is calculated and added to all orders that use the first of the shipping zones. The rest of the zones are tax free. So to use this option you must also select one of the related shipping mechanisms (options 4, 5, 6 and 7).
4. By a specific shipping zone. When you setup shipping you can specify whether a shipping zone is taxable or not.
5. By US State or Canadian Province
   A drop down list of US States and/or Canadian provinces is used in the cart. Tax is added for your state only.
6. US State used in the shipping address.
   You can set a differnet rate for up to ten US states (instead of just one with option 5).
7. Canadian provinces used in the shipping address.
   You can set a different rate for each Province.
8. Shipping country.
   Tax is added for all orders shipped to an address within your country.

 

CANADA

Finally there is a special scheme for Canadian merchants which can be used in conjunction with either option 4 or 5 from the list above. In either case the idea is that you can create a three tier tax schema for local, Canadian (5% tax) and international sales (no tax).

EUROPEAN ECONOMIC AREA

Use this option if you want tax to be applied to everyone in Europe except those with a valid VAT number from another EEA country.