How Tax Rules Work

Tax Rules allow you to automatically charge tax at the point of sale and in sales orders.

Creating a New Tax Rule

To create a new tax rule, follow these steps:

  1. In the top navigation menu, click the "Settings" link.
  2. Then, in the left menu of the Settings page, click the "Tax" link.
  3. Click the "New" button.

This will bring you to the "New Tax Rule" page, shown below:

Here is an example of what a configured tax rule looks like:

Name

The name field is a user-specified description of the tax rule. When tax is applied at the POS or in a Sales Order, the name field is displayed on the screen and on printed receipts.

Tax Jurisdiction

Notice in the rule above that the tax jurisdiction is set to "Apply globally." This means that all stores in all locations will handle this tax rule in the same way. It also means that all "Ship To" addresses on a sales order will have tax applied, even if those address are out of state.

If you have stores in multiple states and you need to tax "Clothing" items differently by state or if you ship items to states where you do not have a store and want to prevent tax from being applied, you will need to set up jurisdictions (see below for more detail) and you will also need to set up a different tax rule for each state.

Type/Rate/Amount

The Type dropdown allows you to choose between percentage-based tax and flat tax (less common). If the "Percentage" option is selected, you must provide a rate to tax each item at. If the "Flat Per Item" option is selected, you must provide a flat tax amount to be added to each item.

Minimum and Maximum Prices (Optional Fields)

The Minimum Price field allows you to to specify whether or not a certain price must be reached before tax is applied and the "Tax Amount Below Minimum" switch allows you to specify whether or not to tax the amount below the minimum. (For example, some states have luxury tax, which doesn't kick in until a certain price threshold is met.)

The Maximum Price field allows you to specify whether items should not be taxed if they are above a certain price. For example if you set a maximum price of $100 on a tax rule, items with a price greater than $100 will not be taxed.

Filters

The way that you determine which items are taxable on each tax category is to set a filter on the items under the "Filters" section. You can use custom fields to apply any filter you like. In the above screeshot, I have set the filter to "Department is Clothing" which means that any field marked "Clothing" will be taxed according to this rule.

If all of the items in your account are taxable, you can simply leave the "Filters" section blank. If no filters are applied to the tax rule, all items are taxed automatically (in the selected jurisdiction).

Note: there's also a way to filter these rules based on customer custom fields. This is a great way to handle tax exempt customers.

Creating a Tax Jurisdiction

The tax jurisdiction determines where the tax is applied. If no tax jurisdiction is set, taxes are applied globally to all matching items. Tax jurisdictions can be created at the state level or at the zip code level.

To create a new tax jurisdiction, follow these steps:

  1. In the top navigation menu, click the "Settings" link.
  2. Then, in the left navigation menu of the Settings page, click the "Tax" link.

The resulting page will show you all existing tax rules that have been set up in your account.

  1. Click the "Edit Tax Jurisdictions" link.

This will bring you to the "Tax Jurisdictions" page.

  1. Click the "New" button.

This will take you to the "New Tax Jurisdiction" page, shown below:

Name

The "Name" field is an internal description and is only visible in the Settings area. We'd recommend that you just use the state name here.

Type/State/Postal Codes/Country

The type dropdown has two options: "State" or "Postal Code List." When "State" is selected, a "State" dropdown field is visible, which allows you to specify which US state the taxes should apply in. When "Postal Code List" is selected, the "State" dropdown is replaced by a text field in which you can enter a list of comma separated zip codes that the taxes should apply in. A "Country" dropdown field is visible (US only at the moment) when either the "State" or "Postal Code List" option is selected.

Important: In order to tax jurisdictions to take effect, you must specify a state and/or postal code on the location record.

Tax Holiday

You can configure the jurisdiction for a tax holiday by providing a beginning date and an end date. Tax rules will be suspended in the jurisdiction in between the dates provided.

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