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Tax configuration settings

Last update: Mon Jul 17 2023 00:00:00 GMT+0000 (Coordinated Universal Time)

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The following instructions take you through the basic tax configuration for your Commerce instance. Before setting up your taxes, make sure that you are familiar with the tax requirements of your locale. Then, complete the tax configuration according to your requirements.

Admin permissions can be set to restrict access to tax resources, based on the business need to know. To create an Admin role with access to tax settings, choose both the Sales/Tax and System/Tax resources. If setting up a website for a region that differs from your default shipping point of origin, you must also allow access to the System/Shipping resources for the role. The shipping settings determine the store tax rate that is used for catalog prices.

Configure the general tax settings

  1. On the Admin sidebar, go to Stores > Settings > Configuration.

  2. For a multisite configuration, set Store View to the website and store that is the target of the configuration.

  3. In the left panel, expand Sales and choose Tax.

  4. Complete the following configuration settings.

    If necessary, clear the Use system value checkbox of any settings that are dimmed.

Tax Classes

  1. Expand Expansion selector the Tax Classes section.

    Tax Classes {width="600" modal="regular"}

    • Tax Class for Shipping — Set to the appropriate class. The default classes are: None and Taxable Goods
    • Tax Class for Gift Options — Adobe Commerce (Adobe Commerce only) Set to the appropriate class. The default classes are: None and Taxable Goods
    • Default Tax Class for Product — Set to the appropriate class. The default classes are: None and Taxable Goods
    • Default Tax Class for Customer — Set to the appropriate class. The default class is: Retail Customer and Wholesale Customer

  2. When complete, click Save Config.

Calculation Settings

  1. Expand the Calculation Settings section.

    Calculation Settings {width="600" modal="regular"}

  2. Set Tax Calculation Method Based On to one of the following:

    • Unit Price - The price of each product
    • Row Total - The total of the line item in the order, less discounts
    • Total - The order total

  3. Set Tax Calculation Based On to one of the following:

    • Shipping Address - The address where the order is to be shipped
    • Billing Address - The billing address of the customer or company
    • Shipping Origin - The address that is specified as the point of origin for your store

  4. Set Catalog Prices to Excluding Tax or Including Tax.

  5. Set Shipping Prices to Excluding Tax or Including Tax.

  6. Set Apply Customer Tax to one of the following to determine whether tax is applied to the original or discounted price: After Discount or Before Discount

  7. Set Apply Discount on Prices to one of the following to determine if discounts include or exclude tax: Excluding Tax or Including Tax

  8. Set Apply Tax On to Custom price if available or Original price only.

  9. Set Enable Cross-Border Trade to one of the following:

    • Yes - Use consistent pricing across different tax rates. If the catalog price includes tax, choose this setting to fix the price regardless of the customer’s tax rate.
    • No - Vary the price by tax rate.
    note important
    IMPORTANT
    If cross-border trade is enabled, the profit margin changes by tax rate. Profit is determined by the formula (Revenue - CustomerVAT - CostOfGoodsSold). To enable cross-border trade, prices must be set to include tax.

Default Tax Destination Calculation

  1. Expand Expansion selector the Default Tax Destination Calculation section.

    Default Tax Destination Calculation {width="600" modal="regular"}

  2. Specify the Default Country for tax calculations.

  3. If applicable, specify the Default State for tax calculations.

  4. If applicable, specify the Default Post Code for tax calculations.

  5. When complete, click Save Config.

Price Display Settings

IMPORTANT
Some combinations of settings related to a price display that both include and exclude tax can be confusing to the customer. To avoid triggering a warning message, see the recommended settings.

  1. Expand Expansion selector the Price Display Settings section.

    Price Display Settings {width="600" modal="regular"}

  2. Set Display Product Prices in Catalog to one of the following:

    • Excluding Tax - Catalog prices that appear in the storefront do not include tax.
    • Including Tax - Catalog prices in the storefront include tax only if a tax rule matches the tax origin, or if the customer’s address matches the tax rule. This might happen after a customer creates an account, logs in, or uses the Estimate Tax and Shipping tool in the cart.
    • Including and Excluding Tax - Catalog prices that appear in the storefront are displayed both with, and without tax.

  3. Set Display Shipping Prices to Excluding Tax, Including Tax, or Including and Excluding Tax.

  4. When complete, click Save Config.

Shopping Cart Display Settings

  1. Expand Expansion selector the Shopping Cart Display Settings section.

    Shopping Cart Display Settings {width="600" modal="regular"}

  2. For each of the following settings, choose how you want taxes and prices to appear in the cart, according to the requirements of your store and locale:

    • Set Display Prices to Excluding Tax, Including Tax, or Including and Excluding Tax.

    • Set Display Subtotal to Excluding Tax, Including Tax, or Including and Excluding Tax.

    • Set Display Shipping Amount to Excluding Tax, Including Tax, or Including and Excluding Tax.

    • Adobe Commerce (Adobe Commerce only) Set Display Gift Wrapping Prices to Excluding Tax, Including Tax, or Including and Excluding Tax.

    • Adobe Commerce (Adobe Commerce only) Set Display Printed Card Prices to Excluding Tax, Including Tax, or Including and Excluding Tax.

  3. Set the following display options to either Yes or No, according to your needs:

    • Include Tax in Order Total
    • Display Full Tax Summary
    • Display Zero Tax Subtotal

  4. When complete, click Save Config.

Orders, Invoices, Credit Memos Display Settings

  1. Expand Expansion the Orders, Invoices, Credit Memos Display Settings section.

    Orders, Invoices, Credit Memos Display Settings {width="600" modal="regular"}

  2. Specify how prices and taxes appear in orders, invoices, and credit memos:

    • Set Display Prices to Excluding Tax, Including Tax, or Including and Excluding Tax.

    • Set Display Subtotal to Excluding Tax, Including Tax, or Including and Excluding Tax.

    • Set Display Shipping Amount to Excluding Tax, Including Tax, or Including and Excluding Tax.

    • Adobe Commerce (Adobe Commerce only) Set Display Gift Wrapping Prices to Excluding Tax, Including Tax, or Including and Excluding Tax.

    • Adobe Commerce (Adobe Commerce only) Set Display Printed Card Prices to Excluding Tax, Including Tax, or Including and Excluding Tax.

  3. Set the following display options to either to Yes or No, according to your requirements:

    • Include Tax in Order Total
    • Display Full Tax Summary
    • Display Zero Tax Subtotal

  4. When complete, click Save Config.

Fixed Product Taxes

  1. Expand Expansion selector the Fixed Product Taxes section.

    Fixed Product Taxes {width="600" modal="regular"}

  2. Set Enable FPT to either to Yes or No, according to your requirements.

  3. If FPT is enabled, specify FPT display options:

    • Display Prices in Product Lists

    • Display Price On Product view Page

    • Display Prices in Sales Modules

    • Display Prices in Emails

    • Including FPT Only - Displayed prices include fixed product taxes. The FPT amount is not displayed separately.

    • Including FPT and FPT description - Displayed prices include fixed product taxes. The FPT amount is displayed separately.

    • Excluding FPT. Including FPT description and final price - Displayed prices do not include fixed product taxes. The FPT amount is displayed separately.

    • Excluding FPT - Displayed prices do not include fixed product taxes. The FPT amount is not displayed separately.

  4. Set Apply Discounts to FPT to Yes or No, according to your requirements.

  5. Set FPT Tax Configuration to determine how FPT is calculated.

    • Not Taxed - Select this option if your taxing jurisdiction does not tax FPT. (For example, California.)
    • Taxed - Select this option if your taxing jurisdiction does tax FPT. (For example, Canada.)
    • Loaded and Displayed with Tax - Click this option if FPT is added to the order total before applying tax. (For example, EU countries.)

  6. Set Include FPT in Subtotal to Yes or No, according to your requirements.

  7. When complete, click Save Config.

Cross-border price consistency

Cross-border trade (also referred to as price consistency) supports European Union (EU) and other merchants who want to maintain consistent prices for customers whose tax rates are different from the store tax rate.

Merchants operating across regions and geographies can display a single price by including the tax in the price of the product. Pricing is clean and uncluttered regardless of tax structures and rates that vary from country to country. These settings require that a tax calculation extension is installed from the Marketplace, such as Vertex Cloud.

NOTE
When cross-border trade is enabled, your profit margin changes by tax rate. Profit is determined by the formula:

Revenue - CustomerVAT - CostOfGoodsSold

To enable cross-border price consistency:

  1. On the Admin sidebar, go to Stores > Settings > Configuration.

  2. For a multisite configuration, set Store View to the website and store that is the target of the configuration.

  3. In the left panel, expand Sales and choose Tax.

  4. Expand Expansion selector the Calculation Settings section.

  5. Set Catalog Prices to Including Tax.

  6. To enable cross-border price consistency, set Enable Cross Border Trade to Yes.

    Enable Cross Border Trade Settings {width="600" modal="regular"}

  7. When complete, click Save Config.

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