Tax Settings

Sales Tax

As a merchant, you may need to calculate and charge sales taxes on your orders. Configuring your store to handle tax by region gives you the flexibility to use different tax services in different markets, while still keeping reporting centralized.

Head to Settings > Taxes to set up taxes for your store.

There are three core concepts in NEXT related to Tax:

• Tax Services - the calculation engine used for a region, such as built-in NEXT Tax, TaxJar, or Avalara AvaTax.
• Tax Regions - the country or region where a tax service applies.
• Tax Rates - the rates used by built-in NEXT Tax regions.

Tax Services

The Tax Services list shows which services are available in your store and whether each one is enabled for a region.

• Next Tax - built-in tax calculation for regions where you manage tax rates directly in NEXT.
• TaxJar - external tax calculation for regions assigned to TaxJar.
• Avalara AvaTax - external tax calculation and reporting for regions assigned to Avalara.

Choose Settings on a service to configure that service's options.

Tax Regions

Tax regions let you assign one tax service to a specific country or region. A store can use more than one tax service at the same time, as long as each region is assigned the service you want to use there.

For example:

• Use Next Tax for EU regions where you want to manage tax rates directly in NEXT.
• Use TaxJar for the US region where you want TaxJar to calculate tax.
• Use Avalara AvaTax for a region that should use Avalara's tax engine.

Tax Rates

Tax Rates are the percentage rates used by regions that rely on built-in NEXT Tax. Tax is calculated based on the customer’s shipping address, or the billing address for digital products. Regions assigned to TaxJar or Avalara AvaTax use the settings from those services instead of manual NEXT tax rates.

Configure Taxes

Access the sales tax configuration for your store from Settings > Taxes.

To start, set up a Tax Region by selecting Add Tax Region. Then choose the tax service that should apply to that region. The listed regions correspond to the available regions configured via Settings > Localization.

If the region uses built-in NEXT Tax, the following options are available:

• Add Tax Rate
• Add Tax Rate Override

Add Tax Rate

Choose Add Tax Rate and define the following values:

• State/Province - defaults to "*" (all) which applies the rate federally.
• Rate (%) - the rate of tax to charge
• Display Name - the name that will appear on customer checkouts and receipts on the tax line item
• Shipping - choose whether to apply tax to shipping fees
• Compound - choose whether to combine this tax rate with other tax rates

To add an additional tax rate to the region, such as a rate conditional to certain states or provinces, repeat the above steps and define a list in the State/Province field separated by "|"

Add Tax Rate Override

To create a tax rate that overrides the store's taxes settings, choose Add Tax Rate Override.

• Override tax rates can be set on a Product Category.
• The override tax rate applies to any order line item containing a product in the category specified.
• Override tax rate does not compound with other tax rates.

Built-in Tax Settings

Global settings define how built-in NEXT Tax is calculated and appears to your store's customers.

Tax Calculation

These options determine how prices are presented to your customers, and thus how tax amounts will be calculated for orders.

Prices that are inclusive of tax means that the price displayed to the customer includes tax, and tax amounts will be included in the order totals.

<tax inclusive calculation example>

Tax Amount = product price - (product price / (( tax% / 100) +1))
price_incl_tax = product price
price_excl_tax = product price - tax

For example, if the product price is $100.00 and the Tax Rate is set at 20%, the tax amount will be $16.67. So the price inclusive of tax will be $100.00 and the price excluding tax will be $83.33

Prices that are exclusive of tax means that the price displayed to the customer excludes tax, and tax amounts will be applied as an additional charge on top of the order.

<tax exclusive calculation example>

Tax Amount = (product price * tax)% / 100
price_incl_tax = product price + tax
price_excl_tax = product price

For example, if the product price is $100.00 and the Tax Rate is set at 20%, the tax amount will be $20.00. So the price inclusive of tax will be $120.00 and the price excluding tax will be $100.0

Recommended Settings

1. Federal Tax only → When only a country-level tax is needed
2. State Taxes only → When only state-level taxes are needed
3. Federal Tax (compound) + State Tax (compound) → When you need the federal tax to be combined with the state tax.
4. Federal Tax (compound) + State Tax (not compound) → When you need a specific state tax instead of the federal tax
5. Override Product Tax + any Federal/State Tax setting → When you need a specific tax rate for certain products, regardless of other tax settings.

Tax Reporting

For a summary of all tax collected by tax rate see Tax Reports