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Last Modified: 10.10.2012

The system is able to calculate and apply taxes during the order calculation. The taxation procedure respects the following rules:

  • individual taxes exist for each site. You can define as many taxes as required;
  • tax rates can depend on the payer type and location. Tax rates are always defined in percentage terms. Tax rates can be included in price;
  • tax exemption rules can be defined. This is done via applying tax exemption conditions to the user groups whose members you want to exempt from taxation.

Defining taxes

Taxes can be configured in the tax management section (e-Store -> e-Store settings -> Taxes -> Taxes). This form displays all taxes that are currently defined in the system. Remember that each tax is the subject of the current site: for example, only the taxes that are defined for a Demo site will be available on that site. For example, you may need to create VAT (Value Added Tax) for a Demo site. The tax editing form will contain the following information:

The following information is essential and you must provide it as accurate as possible:
  • select the site for which the tax is intended;
  • type the name of the tax;
  • specify the tax mnemonic name. This field is generally used by developers;
  • give the tax a description.

Setting tax rates

Tax rates are defined in the tax rates management section (e-Store -> e-Store settings -> Taxes -> Tax rates). Here you can specify rate values depending on the customer's location and payer type (optional).

The tax rate editing form:

Click on image to enlarge

The form has the following fields.

  • Tax: choose the tax for which the rate is defined.
  • Active: only active tax rates are taken into account to calculate the order price.
  • Payer type: the payer type to which this tax rate can be applied.
  • Rate: specifies the tax rate value, in percentage terms.
  • Included in price: defines whether the tax is included in the product price. If so, no tax exemption may take place.
  • Tax priority: tax rates of the same priority are summed up. Tax rates with different priorities form the compound interest (percentage on percentage). The order calculation is discussed below.
  • Locations: choose locations for which this tax is valid and can be applied.
    In the Location groups list, you can select the groups in whose locations the tax will be active.

    You have to select an item in at least one of these lists (i.e. select a location or a location group). However, you can specify both a location and a location group.

To a given order, the system applies all taxes that meet the following conditions:

  • the tax is bound to a site on which an order is currently being performed;
  • the location selected by a customer matches the location specified in the tax settings;

    Note! Every payer type should have a property with the option Use as tax location enabled. Otherwise, tax rates will not be resolved.Click on image to enlarge

  • the payer type assigned to the tax rate matches the payer type selected by a customer when making an order, or the tax rate is not bound to a specific payer type;
  • the tax rate is active.

If you need to create a tax rate for the entire country that has multiple locations, a good idea is to create a location group that would include all locations of this country. Then, select this location group when creating or editing a tax rate.

If more than one tax rate can be applied to a given order, the following rules apply.

  • Tax rates are applied consecutively in the order as declared in the Tax priority field, starting with the least.
  • A tax rate is applied to a value to which other taxes with lesser priority has already been added (the compound interest appears).
  • If more than one tax rate with the same priority exists, these tax rates are summed up and applied atomically.

Consider the following example. Assume a customer buys a product for $25, and there is a discount of 2% for orders over $20. Let the following tax rates apply to this order:

  • Tax 1: rate 18.5%, priority 100;
  • Tax 2: rate 2.7%, priority 100 (the same as Tax 1);
  • Tax 3: rate 3%, priority 200.

In that case, the final discounted price would be $24.5 (25 - 25 * 2 / 100).
Tax 1 amounts to $4,53 (24.5 * 18.5 / 100).
Tax 2 amounts to $0.66 (24.5 * 2.7 / 100). After the Tax 1 and Tax 2 have been applied, the order price would be $29.69 (24.5 + 4.53 + 0.66).
Tax 3 amounts to $0.89 (29.69 * 3 / 100).
Having the discount and all taxes applied, the order price is $30.58 (29.69 + 0.89). And now the cost of delivery can be added.

In the public section, the taxation information is shown during the ordering process:

Click on image to enlarge

Tax exemption

You can use this function if some of your customers can be tax exempt.

Create a special user group, for example: Tax exempt. Do not give that group any special permissions; just leave them as is.

Then, open the tax exemption form (e-Store -> e-Store settings -> Taxes -> Tax exemption). This page displays all user groups defined in the system. Click the action menu button of the tax exempt user group, and select Modify tax exemption. In the tax exemption editing form, select taxes that will not be levied on members of that group.

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