Documentation Commerce Stores and Purchase Experience

Tax classes

Last update: July 17, 2023

Topics:
Taxes

CREATED FOR:

Beginner
Intermediate
Admin
User

Tax classes can be assigned to customers, products, and shipping. Commerce analyzes the shopping cart of each customer and calculates the appropriate tax according to the class of the customer, the class of the products in the cart, and the region. The region is determined by the customer’s shipping address, billing address, or shipping origin. New tax classes can be created when a tax rule is defined.

Customer — You can create as many customer tax classes as you need, and assign them to customer groups. For example, in some jurisdictions, wholesale transactions are not taxed, but retail transactions are. You can associate members of the Wholesale Customer group with the Wholesale tax class.
Product — Product classes are used in calculations to determine the correct tax rate is applied in the shopping cart. When you create product, it is assigned to a specific tax class. For example, food might not be taxed, or be taxed at a different rate.
Shipping — If your store charges an extra tax on shipping, you should designate a specific product tax class for shipping. Then in the configuration, specify it as the tax class that is used for shipping.

Configure tax classes

The tax class that is used for shipping, and the default tax classes for products and customers are set in the Sales configuration.

On the Admin sidebar, go to Stores > Settings > Configuration.
In the left panel, expand Sales and choose Tax.
Expand the Tax Classes section.
Choose the tax class for each of the following:
- Set Tax Class for Shipping
- Tax Class for Gift Options
- Default Tax Class for Product
- Default Tax Class for Customer
When complete, click Save Config.

Add tax classes

Tax classes for customers and products can be easily added, and then assigned to individual customers and products, and used in tax rules.

On the Admin sidebar, go to Stores > Taxes > Tax Rules.
Click Add New Tax Rule.
Expand the Additional Settings section.
Under Customer Tax Class, click Add New Tax Class.
Enter the Name of the new tax class in the text box.
To add the new class to the list of available customer tax classes, click the checkmark.

Add a product tax class

Under Product Tax Class, click Add New Tax Class.
Enter the Name of the new tax class in the text box.
To add the new class to the list of available product tax classes, click the checkmark.
When complete, click Back in the button bar to return to the Tax Rules grid.

Default tax destination

The default tax destination settings determine the country, state, and ZIP or postal code that are used as the basis of tax calculations.

To configure the default tax destination for calculations:

On the Admin sidebar, go to Stores > Settings > Configuration.
In the left panel, expand Sales and choose Tax.
Expand the Default Tax Destination Calculation section.
Set Default Country to the country upon which tax calculations are based.
Set Default State to the state or province that is used as the basis of tax calculations.
Set Default Post Code to the ZIP or postal code that is used as the basis of local tax calculations.
When complete, click Save Config.

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