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Setting up Taxes in WooCommerce

Setting up Taxes in WooCommerce

 

Setting up taxes and tax rates is one of the first tasks you want to perform when setting up a store. Taxes can be a complex matter, but WooCommerce aims to make setup as straightforward as possible.

Enabling Taxes

To access the tax settings screens, they first need to be enabled.

  1. Go toWooCommerce > Settings > General.
  2. Select the Enable Taxes and Tax Calculations checkbox.
  3. Save changes.

Configuring Tax Options

To start configuring taxes:

Go to: WooCommerce > Settings > Tax. This tab is only visible if taxes are enabled.

The Tax tab displays several options that can be set to suit your needs — settings you choose are based on the tax jurisdiction under which your store is located.

Prices Entered With Tax

This option is perhaps the most important when managing taxes in your store, as it determines how you input product prices later on.

  • “Yes, I will enter prices inclusive of tax” means that all catalog prices are input using your store’s base tax rate.

For example, in the UK you would input prices inclusive of the 20% tax rate e.g. You enter a product price of £9.99 that includes £1.67 tax. A customer in the UK would pay £9.99 as defined, and a customer in the US would only pay £8.32.

  • “No, I will enter prices exclusive of tax” would mean that your catalog prices need to be tax exclusive.

Using the example from above, a UK shop would enter 8.32 at the product price. A tax of 20% would be applied on top of this during checkout making the amount payable £9.99.

The tax calculation for tax-inclusive prices is:

tax_amount = price - ( price / ( ( tax_rate_% / 100 ) + 1 ) )

The tax calculation for tax-exclusive prices is:

tax_amount = price * ( tax_rate_% / 100 )

Calculate Tax Based On

This setting determines which address is used for tax calculations.

  • Customer billing address
  • Customer shipping address (default)
  • Store base address

If you use store base address, taxes are always based on your store location and not your customer’s location.

Shipping Tax Class

In most setups, shipping tax class is inherited from the item being shipped, e.g., Shipping a reduced rate item such as baby clothes would also use a reduced rate. If this is not the case in your jurisdiction, choose a different tax class.

Rounding

If you enable Rounding tax at subtotal level, instead of per line, the rounding is done at the Subtotal level. Check your tax jurisdiction to know if this is done.

Additional Tax Classes

Tax Classes are assigned to your products. In most cases, you want to use the default Standard class. If you sell goods that require a different tax class (i.e., Tax, except zero-rated products) you can add the classes here. To get started, we include Standard, Reduced Rate and Zero Rate tax classes.

Each class is listed at the top of the tax settings page – click a class to view tax rates assigned to the class.

Display Prices in the Shop

This option determines how prices are displayed in your shop/catalog. Choose from inclusive/exclusive tax display.

Display Prices During Cart and Checkout

This option determines how prices are displayed in your cart and checkout pages – it works independently of your catalog prices. Choose from inclusive/exclusive tax display.

Setting up tax rates

Tax classes are displayed at the top of the tax screen. Click one to view tax rates for the class.

In the tax rates table, you can define tax rates (one per row). Click Insert Row to get started.

Each tax rate has these attributes:

  • Country Code – 2 digit country code for the rate. Use ISO 3166-1 alpha-2 codes. Leave blank (*) to apply to all countries.
  • State Code – 2 digit state code for the rate. See i18n/states/COUNTRYCODE.php for supported states. For the US, use a 2 digit abbreviation e.g. AL. Leave blank (*) to apply to all states.
  • ZIP/Postcode – Enter postcodes for the rate. You may separate multiple values with a semi-colon (;), use wildcards to match several postcodes (e.g. PE* would match all postcodes starting with PE), and use numeric ranges (e.g. 2000…3000). Leave blank (*) to apply to all postcodes.
  • City – Semi-colon separated list of cities for the rate. Leave blank (*) to apply to all cities.
  • Rate % – Enter the tax rate, for example, 20.000 for a tax rate of 20%.
  • Tax Name – Name your tax, e.g. VAT
  • Priority – Choose a priority for this tax rate. Only 1 matching rate per priority will be used. To define multiple tax rates for a single area you need to specify a different priority per rate.
  • Compound – If this rate is compound (applied on top of all prior taxes) check this box.
  • Shipping – If this rate also applies to shipping, check this box.

Tax rate examples

Here is an example of a tax setup for a UK store — 20% for UK customers only.

In this example, we have a 6% tax rate for all U.S. states except California, which has a 7% tax rate and a local tax rate of 2% for ZIP code 90210. Notice the priorities — this demonstrates how you can ‘layer’ rates on top of another.

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