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How do I configure my tax settings?
With BigCommerce you can easily setup your tax settings based on your store's location and needs. We provide the flexibility to have multiple tax configurations including the following features:
Include/Exclude tax on products
Control over which address the tax is based from(shipping, billing, or store location)
Ability to create custom tax classes allowing you to have specific tax rates for groups of products
Control over the tax on gift wrapping
Ability to display tax differently(Include/Exclude) throughout the storefront
Creation of tax zones to have control over the geographical location taxes are displayed
Creation of tax rates, which allows tax zones to have multiple taxes added based on the zone
Tax Settings Example
In this example, the store has four tax classes, as seen above. These are used to give different rates for items that fall under a different tax rate than your "normal" taxable items. An example of this type of product would be alcohol or cigarettes. Both of these have their own tax laws and rates versus, let's say, a t-shirt. In this example, we will not have any of these tax classes. (An explanation if you do will be provided.)
There are also three different tax zones in which this example needs to set up tax rates. Every state and country has different tax laws, so contacting your local CPA or comptroller is always a good idea to make sure you are charging appropriately for your business. In this example, we've decided that we have to charge tax in Texas, Florida, & Canada. Texas has a state tax, so it only needs one tax zone. Florida has its taxes based upon county, so this would require a separate tax zone for each tax rate (and then assign the zip codes to that tax zone.) Canada has two tax rates: a federal and city tax, that must be applied in a certain order to charge customers appropriately.
The most important thing that you do is first figure out how your tax rates and zones must be set up. Taxes are based upon location, and thus your tax zones will usually be set up that way, as well. The only exception to that rule is in a state such as Florida or California. In those two states (there are others, as well), taxes are done by county. However, we only have zones able to be set up based on country, state, or zip code. This means that for the states with county-based tax, you must categorize the rates first, and then assign the zip codes to that particular rate to successfully create the zones. (More about this will be explained in that section of the article.)
Let's Get Started!
Now that we've decided how we need to set up our tax zones, we can get started. First, let's go to the tax settings area.
1.) Login to your store's control panel.
2.) Click on Settings and then Tax.
Configuring Your Main Tax Settings
Determine how you need to configure the the main tax settings.
Tax Label - A general name that describes the type of tax applied to orders on your store. This will be shown throughout your store when prices are set to be shown as including and excluding tax, or when taxes on orders are shown as one summarized line item. Some suggested values include: Tax, Sales Tax, or GST.
Prices Entered With Tax - Choose Yes, I will enter prices inclusive of tax if you will be entering your product prices with the tax component already applied, or No, I will enter prices exclusive of tax if the product prices you will be entering do not already include tax.
Calculate Tax Based on - This setting controls which address should be used to determine the tax zone that a customer falls under. Choose Billing Address to determine a customer's tax zone based on their order's billing address, or Shipping Address to base the applicable tax zone on a customer's shipping address. If tax zones should be determined by your store's address, choose Store Address.
Shipping Tax Class - Choose the tax class (configured using the Tax Classes tab) that taxes for shipping costs should be calculated using. Charging shipping costs using a different tax class will allow you to tax shipping at a higher rate, or not at all.
Gift Wrapping Tax Class - Choose the tax class (configured using the Tax Classes tab) that taxes for gift wrapping applied to products should be calculated using. Charging gift wrapping using a different tax class will allow you to tax gift wrapping at a higher rate, or not at all.
Show Prices on Product Listings - This setting controls how product prices should be shown on listings such as the list of products in a particular category, brand or set of search results. Choose Including tax to show product prices on these listing pages inclusive of any tax charges. Choose Excluding tax to show prices excluding tax. Choosing Including and excluding tax will show both the inclusive and exclusive tax price for each product, using the Tax Label configured above.
Show Prices on Product Pages - This setting controls how product prices should be shown on the product page when viewing a single product. Choose Including tax to show the product price inclusive of any tax charges. Choose Excluding tax to show the product price excluding tax. Choosing Including and excluding tax will show both the inclusive and exclusive tax price for the product, using the Tax Label configured above.
Show Prices in Shopping Carts - This setting controls how pricing should be shown on the View Cart page. Choose Including tax to show all prices on the View Cart page inclusive of any tax charges, and tax as included in the grand total. Choose Excluding tax to show all prices excluding tax.
Show Tax Charges in Cart - This setting controls how the list of applied taxes on a customer's cart should be shown on the View Cart page. Choose As one summarized line item to show a single combined tax total in the cart with the 'Tax Label' specified above, or Broken down by tax rate to show a detailed tax summary of each tax rate and the amount that applies to the cart.
Show Prices on Orders & Invoices - This setting controls how pricing should be shown on orders placed by customers, and their associated invoices. Choose Including tax to show all prices inclusive of any tax charges, and as tax included in the grand total. Choose Excluding tax to show all prices excluding tax.
Show Tax Charges on Orders - This setting controls how the list of applied taxes on an order should be shown to customers on invoices, and in your store's control panel. Choose As one summarized line item to show a single combined tax total on an order with the 'Tax Label' specified above, or Broken down by tax rate to show a detailed tax summary of each tax rate and the amount that applied to an order.
Configure Default Tax Address - This is the address that will be used to determine the tax zone to be used for all tax calculations throughout your store, until a customer checks out or estimates applied taxes on the View Cart page. If the majority of your customer's are from a specific location, this address will allow you to show your store inclusive of all taxes that apply to that location, and when the customer makes a purchase, applied taxes will then be calculated using their address rather than this default address. If you've selected Yes, I will enter prices inclusive of tax above, then it will be assumed that product prices entered inclusive of tax contain the tax component that this default address falls under
Usually, we recommend that the Configure Tax Options area stays default, but change all the "Including Tax" settings on the price options to be Excluding Tax instead. At least for customers in the United States, most are used to seeing prices excluding tax, especially on eCommerce stores where they might never be charged tax in the first place. If you change anything, make sure to click Save at the bottom of the page. Here is an example of a typical settings page:
Creating Tax Classes
Tax classes give you the flexibility to charge different tax on specific products than others using the default tax class. An example would be creating different product groups (such as alcohol) which can have their own tax rates as required by law, or the ability to have tax-exempt products. By setting up more than one tax class, you allow for different rates to be assigned to different products. By default there are four primary tax classes that are created for you:
Default Tax Class
Gift Wrapping
Non-Taxable Products
Shipping
To look at your current tax classes, simply click the tab called Tax Classes.
You can the modify current classes, or add to the list by selecting the plus sign following the last defined class. You may also remove tax classes, if you wish, by clicking the minus sign. Please note that if you plan on using Google Checkout, you must have at least two tax classes.
If you make any changes, please make sure to Save them.
Setting up Tax Zones & Rates
As previous stated, tax zones can be created based on a country, state, or zip/postal code.
We'll go over three different examples of tax zones:
A single tax rate based on a state or country
Multiple tax rates based on a state or country
A single tax rate based on zip codes
Single Tax Rate based on a State or Country
Let's set up the Texas zone we saw earlier in the example. This zone is based on a state with a single tax rate.
1.) In the tax settings area, click on the Tax Rates & Zones tab.
2.) Leave the Default Zone alone; it makes sure that anywhere for which you do not specify a zone will not get charged tax.
3.) Click the Add a Tax Zone button.
4.) For our Texas zone, we'll first name it that, and then choose the radio button next to This tax zone is based on one or more states/provinces.
5.) Then, select United States in the country box to populate the states box. Choose Texas.
6.) Leave the rest default, as the other options are only for disabling the zone and setting up different tax groups for customers. If you need to have tax-exempt customers, for instance, please visit this article.
7.) Click Save.
8.) Now, click the Add a Tax Rate button.
9.) Name the tax rate, and type in the percentages for the appropriate tax classes. In this case, I want to charge tax only on my products (not gift wrapping or shipping), so I'll only put the 8.25 in that box, and put 0 for the rest.
10.) Click Save.
11.) Make sure to click the rebuild your product prices link to finish setting up your tax zone & rate.
Now, this Texas zone is set up successfully.
Back to Setting up Tax Zones & Rates
Multiple Tax Rates based on a State or Country
Let's set up the Canadian zone we saw earlier in the example. This zone is based on a country with multiple tax rates.
1.) In the tax settings area, click on the Tax Rates & Zones tab.
2.) Leave the Default Zone alone; it makes sure that anywhere for which you do not specify a zone will not get charged tax.
3.) Click the Add a Tax Zone button.
4.) For our Canadian zone, we'll first name it, and then check the box next to it in the list of countries. In this example, we'll use the province of Quebec.
5.) Click Save.
6.) Now, click the Add a Tax Rate button.
7.) In this example, we're adding two tax rates: a federal and a provincial tax. We need to add the one that is calculated first, as we will need to specify a calculation priority for the two rates. Lower numbers gives the rate a higher priority, so we'll add the Federal sales tax first. (Remember to consult with your local CPA or comptroller to know how you need to charge sales tax.)
8.) Name the sales tax appropriately, and then type in the percentages for the rates. In this case, I only want to charge sales tax on products, and not shipping or gift wrapping, so only the first box has a number other than 0 in it.
9.) Click Save.
10.) Now, we need to add the provincial tax, which is calculated after the federal tax. Click the Add a Tax Rate button again.
11.) Again, name the tax rate appropriately, and type in the percentages for the rates. In this case, however, we are going to change the calculation priority. Because we want the city tax to be calculated after the federal tax is calculated, we must change the calculation priority to a higher number. So, the calculation priority is going to be 1. That will ensure that the federal tax (with the lower number) is taken into account first, and then the city tax will be calculated.
12.) Make sure to click the rebuild your product prices link to finish setting up your tax zone & rates.
Now, this Canada zone is set up successfully.
Back to Setting up Tax Zones & Rates
Single Tax Rate based on Zip Codes
Let's set up the Florida zone we saw earlier in the example. This zone is based on zip codes assigned to a single tax rate.
1.) In the tax settings area, click on the Tax Rates & Zones tab.
2.) Leave the Default Zone alone; it makes sure that anywhere for which you do not specify a zone will not get charged tax.
3.) Click the Add a Tax Zone button.
4.) Because of the complexity of tax law in Florida, you cannot have one zone for the state. The best way to set up charging sales tax for a state such as Florida is to sort the zip codes and assign them to an applicable sales tax rate. While you will still be setting up zones based upon location, the way to have as few tax zones as possible is to sort them by sales tax rate.
For instance, let's say that there are only four actual sales tax rates in Florida: 7.25%, 7.75%, 8.25%, & 8.75%. There are many zip codes that apply to each of these four rates. Rather than create a zone for each zip code, and assign it the appropriate rate, we could instead create four zones and put all of the zip codes that apply to that rate in the zone. This is why it is important to know how your tax rates are collected prior to setting up the rules in your store.
For this example, we're only going to set up one of the zones, so that you can see how it is done. You will only need to repeat these steps to completely set up the tax rates for the state.
5.) Name the zone according to its location and tax rate to make it easier to identify later (i.e. Florida-7.75%). Then, choose the radio button next to This tax zone is based on one or more postal or ZIP codes.
6.) Choose the country from the dropdown, and then type in the zip codes that apply to your specified tax rate. In the example below, you can see that some wildcards have been used. Using these can help you reduce the amount of typing you have to do. Please visit this article to learn more about wildcards in zip/postal codes.
Here, any customer in the zip codes starting with "335" and "336" will trigger this tax rate. Also, the zip codes of 33821 - 33823 and 33829 will also trigger the tax rate. Lastly, any customer that has a zip code that starts with 338 and ends in 0 will also trigger this tax rate.
7.) Click Save.
8.) Now, click the Add a Tax Rate button.
9.) Name the tax rate, and type in the percentage for the Default Tax Class. I do not want to charge tax on shipping or gift wrapping, so those will get a value a 0, as will the Non-Taxable class.
10.) Click Save.
11.) Make sure to click the rebuild your product prices link to finish setting up your tax zone & rates.
Now, the 7.75% Florida zone is set up successfully. Remember to repeat the process for the rest of your tax rates.
You have now configured your Tax Settings within your BigCommerce Store! Now all you have to do is determine if you have any products that need to use a custom tax class. If you do, then proceed to the next section; if not, you are done!
Choosing a Tax Class for your Products
When editing a product you can choose whether the item is taxable or not. You can change the tax class from default to a custom class that you have created.
1.) Either Edit a product or Create a new one.
2.) On the Details tab, scroll down to the Pricing & Pre-Order Options section. There, you will find a choice of Tax Class.
3.) Change this to the appropriate tax class for that product.
4.) Click Save & Exit to save your changes.
Back to Setting up Tax Zones & Rates
Include/Exclude tax on products
Control over which address the tax is based from(shipping, billing, or store location)
Ability to create custom tax classes allowing you to have specific tax rates for groups of products
Control over the tax on gift wrapping
Ability to display tax differently(Include/Exclude) throughout the storefront
Creation of tax zones to have control over the geographical location taxes are displayed
Creation of tax rates, which allows tax zones to have multiple taxes added based on the zone
Tax Settings Example
In this example, the store has four tax classes, as seen above. These are used to give different rates for items that fall under a different tax rate than your "normal" taxable items. An example of this type of product would be alcohol or cigarettes. Both of these have their own tax laws and rates versus, let's say, a t-shirt. In this example, we will not have any of these tax classes. (An explanation if you do will be provided.)
There are also three different tax zones in which this example needs to set up tax rates. Every state and country has different tax laws, so contacting your local CPA or comptroller is always a good idea to make sure you are charging appropriately for your business. In this example, we've decided that we have to charge tax in Texas, Florida, & Canada. Texas has a state tax, so it only needs one tax zone. Florida has its taxes based upon county, so this would require a separate tax zone for each tax rate (and then assign the zip codes to that tax zone.) Canada has two tax rates: a federal and city tax, that must be applied in a certain order to charge customers appropriately.
The most important thing that you do is first figure out how your tax rates and zones must be set up. Taxes are based upon location, and thus your tax zones will usually be set up that way, as well. The only exception to that rule is in a state such as Florida or California. In those two states (there are others, as well), taxes are done by county. However, we only have zones able to be set up based on country, state, or zip code. This means that for the states with county-based tax, you must categorize the rates first, and then assign the zip codes to that particular rate to successfully create the zones. (More about this will be explained in that section of the article.)
Let's Get Started!
Now that we've decided how we need to set up our tax zones, we can get started. First, let's go to the tax settings area.
1.) Login to your store's control panel.
2.) Click on Settings and then Tax.
Configuring Your Main Tax Settings
Determine how you need to configure the the main tax settings.
Tax Label - A general name that describes the type of tax applied to orders on your store. This will be shown throughout your store when prices are set to be shown as including and excluding tax, or when taxes on orders are shown as one summarized line item. Some suggested values include: Tax, Sales Tax, or GST.
Prices Entered With Tax - Choose Yes, I will enter prices inclusive of tax if you will be entering your product prices with the tax component already applied, or No, I will enter prices exclusive of tax if the product prices you will be entering do not already include tax.
Calculate Tax Based on - This setting controls which address should be used to determine the tax zone that a customer falls under. Choose Billing Address to determine a customer's tax zone based on their order's billing address, or Shipping Address to base the applicable tax zone on a customer's shipping address. If tax zones should be determined by your store's address, choose Store Address.
Shipping Tax Class - Choose the tax class (configured using the Tax Classes tab) that taxes for shipping costs should be calculated using. Charging shipping costs using a different tax class will allow you to tax shipping at a higher rate, or not at all.
Gift Wrapping Tax Class - Choose the tax class (configured using the Tax Classes tab) that taxes for gift wrapping applied to products should be calculated using. Charging gift wrapping using a different tax class will allow you to tax gift wrapping at a higher rate, or not at all.
Show Prices on Product Listings - This setting controls how product prices should be shown on listings such as the list of products in a particular category, brand or set of search results. Choose Including tax to show product prices on these listing pages inclusive of any tax charges. Choose Excluding tax to show prices excluding tax. Choosing Including and excluding tax will show both the inclusive and exclusive tax price for each product, using the Tax Label configured above.
Show Prices on Product Pages - This setting controls how product prices should be shown on the product page when viewing a single product. Choose Including tax to show the product price inclusive of any tax charges. Choose Excluding tax to show the product price excluding tax. Choosing Including and excluding tax will show both the inclusive and exclusive tax price for the product, using the Tax Label configured above.
Show Prices in Shopping Carts - This setting controls how pricing should be shown on the View Cart page. Choose Including tax to show all prices on the View Cart page inclusive of any tax charges, and tax as included in the grand total. Choose Excluding tax to show all prices excluding tax.
Show Tax Charges in Cart - This setting controls how the list of applied taxes on a customer's cart should be shown on the View Cart page. Choose As one summarized line item to show a single combined tax total in the cart with the 'Tax Label' specified above, or Broken down by tax rate to show a detailed tax summary of each tax rate and the amount that applies to the cart.
Show Prices on Orders & Invoices - This setting controls how pricing should be shown on orders placed by customers, and their associated invoices. Choose Including tax to show all prices inclusive of any tax charges, and as tax included in the grand total. Choose Excluding tax to show all prices excluding tax.
Show Tax Charges on Orders - This setting controls how the list of applied taxes on an order should be shown to customers on invoices, and in your store's control panel. Choose As one summarized line item to show a single combined tax total on an order with the 'Tax Label' specified above, or Broken down by tax rate to show a detailed tax summary of each tax rate and the amount that applied to an order.
Configure Default Tax Address - This is the address that will be used to determine the tax zone to be used for all tax calculations throughout your store, until a customer checks out or estimates applied taxes on the View Cart page. If the majority of your customer's are from a specific location, this address will allow you to show your store inclusive of all taxes that apply to that location, and when the customer makes a purchase, applied taxes will then be calculated using their address rather than this default address. If you've selected Yes, I will enter prices inclusive of tax above, then it will be assumed that product prices entered inclusive of tax contain the tax component that this default address falls under
Usually, we recommend that the Configure Tax Options area stays default, but change all the "Including Tax" settings on the price options to be Excluding Tax instead. At least for customers in the United States, most are used to seeing prices excluding tax, especially on eCommerce stores where they might never be charged tax in the first place. If you change anything, make sure to click Save at the bottom of the page. Here is an example of a typical settings page:
Creating Tax Classes
Tax classes give you the flexibility to charge different tax on specific products than others using the default tax class. An example would be creating different product groups (such as alcohol) which can have their own tax rates as required by law, or the ability to have tax-exempt products. By setting up more than one tax class, you allow for different rates to be assigned to different products. By default there are four primary tax classes that are created for you:
Default Tax Class
Gift Wrapping
Non-Taxable Products
Shipping
To look at your current tax classes, simply click the tab called Tax Classes.
You can the modify current classes, or add to the list by selecting the plus sign following the last defined class. You may also remove tax classes, if you wish, by clicking the minus sign. Please note that if you plan on using Google Checkout, you must have at least two tax classes.
If you make any changes, please make sure to Save them.
Setting up Tax Zones & Rates
As previous stated, tax zones can be created based on a country, state, or zip/postal code.
We'll go over three different examples of tax zones:
A single tax rate based on a state or country
Multiple tax rates based on a state or country
A single tax rate based on zip codes
Single Tax Rate based on a State or Country
Let's set up the Texas zone we saw earlier in the example. This zone is based on a state with a single tax rate.
1.) In the tax settings area, click on the Tax Rates & Zones tab.
2.) Leave the Default Zone alone; it makes sure that anywhere for which you do not specify a zone will not get charged tax.
3.) Click the Add a Tax Zone button.
4.) For our Texas zone, we'll first name it that, and then choose the radio button next to This tax zone is based on one or more states/provinces.
5.) Then, select United States in the country box to populate the states box. Choose Texas.
6.) Leave the rest default, as the other options are only for disabling the zone and setting up different tax groups for customers. If you need to have tax-exempt customers, for instance, please visit this article.
7.) Click Save.
8.) Now, click the Add a Tax Rate button.
9.) Name the tax rate, and type in the percentages for the appropriate tax classes. In this case, I want to charge tax only on my products (not gift wrapping or shipping), so I'll only put the 8.25 in that box, and put 0 for the rest.
10.) Click Save.
11.) Make sure to click the rebuild your product prices link to finish setting up your tax zone & rate.
Now, this Texas zone is set up successfully.
Back to Setting up Tax Zones & Rates
Multiple Tax Rates based on a State or Country
Let's set up the Canadian zone we saw earlier in the example. This zone is based on a country with multiple tax rates.
1.) In the tax settings area, click on the Tax Rates & Zones tab.
2.) Leave the Default Zone alone; it makes sure that anywhere for which you do not specify a zone will not get charged tax.
3.) Click the Add a Tax Zone button.
4.) For our Canadian zone, we'll first name it, and then check the box next to it in the list of countries. In this example, we'll use the province of Quebec.
5.) Click Save.
6.) Now, click the Add a Tax Rate button.
7.) In this example, we're adding two tax rates: a federal and a provincial tax. We need to add the one that is calculated first, as we will need to specify a calculation priority for the two rates. Lower numbers gives the rate a higher priority, so we'll add the Federal sales tax first. (Remember to consult with your local CPA or comptroller to know how you need to charge sales tax.)
8.) Name the sales tax appropriately, and then type in the percentages for the rates. In this case, I only want to charge sales tax on products, and not shipping or gift wrapping, so only the first box has a number other than 0 in it.
9.) Click Save.
10.) Now, we need to add the provincial tax, which is calculated after the federal tax. Click the Add a Tax Rate button again.
11.) Again, name the tax rate appropriately, and type in the percentages for the rates. In this case, however, we are going to change the calculation priority. Because we want the city tax to be calculated after the federal tax is calculated, we must change the calculation priority to a higher number. So, the calculation priority is going to be 1. That will ensure that the federal tax (with the lower number) is taken into account first, and then the city tax will be calculated.
12.) Make sure to click the rebuild your product prices link to finish setting up your tax zone & rates.
Now, this Canada zone is set up successfully.
Back to Setting up Tax Zones & Rates
Single Tax Rate based on Zip Codes
Let's set up the Florida zone we saw earlier in the example. This zone is based on zip codes assigned to a single tax rate.
1.) In the tax settings area, click on the Tax Rates & Zones tab.
2.) Leave the Default Zone alone; it makes sure that anywhere for which you do not specify a zone will not get charged tax.
3.) Click the Add a Tax Zone button.
4.) Because of the complexity of tax law in Florida, you cannot have one zone for the state. The best way to set up charging sales tax for a state such as Florida is to sort the zip codes and assign them to an applicable sales tax rate. While you will still be setting up zones based upon location, the way to have as few tax zones as possible is to sort them by sales tax rate.
For instance, let's say that there are only four actual sales tax rates in Florida: 7.25%, 7.75%, 8.25%, & 8.75%. There are many zip codes that apply to each of these four rates. Rather than create a zone for each zip code, and assign it the appropriate rate, we could instead create four zones and put all of the zip codes that apply to that rate in the zone. This is why it is important to know how your tax rates are collected prior to setting up the rules in your store.
For this example, we're only going to set up one of the zones, so that you can see how it is done. You will only need to repeat these steps to completely set up the tax rates for the state.
5.) Name the zone according to its location and tax rate to make it easier to identify later (i.e. Florida-7.75%). Then, choose the radio button next to This tax zone is based on one or more postal or ZIP codes.
6.) Choose the country from the dropdown, and then type in the zip codes that apply to your specified tax rate. In the example below, you can see that some wildcards have been used. Using these can help you reduce the amount of typing you have to do. Please visit this article to learn more about wildcards in zip/postal codes.
Here, any customer in the zip codes starting with "335" and "336" will trigger this tax rate. Also, the zip codes of 33821 - 33823 and 33829 will also trigger the tax rate. Lastly, any customer that has a zip code that starts with 338 and ends in 0 will also trigger this tax rate.
7.) Click Save.
8.) Now, click the Add a Tax Rate button.
9.) Name the tax rate, and type in the percentage for the Default Tax Class. I do not want to charge tax on shipping or gift wrapping, so those will get a value a 0, as will the Non-Taxable class.
10.) Click Save.
11.) Make sure to click the rebuild your product prices link to finish setting up your tax zone & rates.
Now, the 7.75% Florida zone is set up successfully. Remember to repeat the process for the rest of your tax rates.
You have now configured your Tax Settings within your BigCommerce Store! Now all you have to do is determine if you have any products that need to use a custom tax class. If you do, then proceed to the next section; if not, you are done!
Choosing a Tax Class for your Products
When editing a product you can choose whether the item is taxable or not. You can change the tax class from default to a custom class that you have created.
1.) Either Edit a product or Create a new one.
2.) On the Details tab, scroll down to the Pricing & Pre-Order Options section. There, you will find a choice of Tax Class.
3.) Change this to the appropriate tax class for that product.
4.) Click Save & Exit to save your changes.
Back to Setting up Tax Zones & Rates
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