Checkout Sales Tax

Tax Groups

Checkout has the ability to handle different sales tax scenarios. The most straightforward scenario is where you collect just one sales tax in your store. More complex scenarios involve different sales tax rates for different items or the price of items, and when selling to customers in different locations. The sales tax structure also determines how the collections of taxes will be reported. Sales tax rates are set by creating Groups & Rates in the Manager > Taxes area of Checkout, and reported in the Tax report in Manager > Reports > Tax.

If you are shipping products to customers, and you need to apply different sales tax rates based on your customer's location, you will need to use the Regions feature. This feature, and the Shipping feature, can only be applied to Quotes and Orders, which will then be converted to Sale Invoices. The New Sale does not include shipping, and therefore does not include Regions Sales Taxes.

When sales tax is based on Sales Tax, the Tax Report shows all sales taxes collected, including sales tax collected for each tax name within a Tax Group. When the sales tax is based on VAT, the report shows tax collected, and tax claimable based on sales tax paid on purchases.

To set a (single-rate) sales tax for a single tax authority

• Open the Manager > Taxes window
• Click the '+' button in the left-hand Groups pane
• Add the Group Tax name
• With that name highlighted, click the '+' button in the right-hand pane
• Add a Tax name and rate
• Place a check mark in the box indicating this rate should be applied to new products when they are added (if appropriate)
• Indicate how this Group should be used (Sales, Purchases, All)

The Tax report will show the sales tax collected for the tax authority.

To set a (multi-rate) sales tax for two or more tax authorities (for example a state and a city sales tax)

• Open the Manager > Taxes window
• Click the '+' button in the left-hand Groups pane
• Add the Group Tax name (perhaps something such as store tax)
• With that name highlighted, click the '+' button in the right-hand pane
• Add a Tax name and rate for each tax authority (for example, one for state, one for city)
• The rates will be added together when applied to sales and purchases
• Place a check mark in the box indicating this rate should be applied to new products when they are added (if appropriate)
• Indicate how this Group should be used (Sales, Purchases, All)

To Implement either of the above Tax Groups

• In the Manager > Products > Pricing window, select the Tax Group that applies to the Product

You can use the above (single-rate or multi-rate) steps to create several tax groups that can be applied to various Products (different Tax Group of rates for different products).

On invoices, products will be taxed at the Tax Group rate, which will be the sum of all the rates associated with the Group. The Tax report will show the sales tax collected for each tax authority (each rate), while the invoice will show the total sales tax collected.

Regions

Use Regions when shipping products to customers and different sales tax rates need to be applied based on customer locations.

When using Regions, if no default tax is set, no sales tax will be applied when making a New Sale. Only a tax that has a default region selected will be applied when doing a New Sale.

Regions sales tax rates are set by associating Tax Rates (of Tax Groups) to Regions.

Regions tax rates are hierarchical: a sub-region tax will be the sum of the sub-region and its parent tax rates.

Once the Tax Regions feature is set, you cannot undo the Tax Regions feature.

To set Tax Regions for shipping Products to various locations

• Set the either single-rate or multi-rate Tax Groups and Rates sales taxes as indicated above
• You can group similar taxes into Tax Groups, that is state taxes into a state group, city taxes into a city group, etc. The Tax Rates within Tax Groups provide the tax rates for Regions and Sub-regions.
• Click the Tax Regions tab
• Click the '+' button to create a new Region
• Indicate its name and code
• If appropriate, add Sub-Regions, indicating the names and codes. The sales tax in sub-regions will be the sum of the sub-region plus the parent regions
• If appropriate, indicate the Default Tax Region
• Click on the Groups & Rates tab
• Select the Tax Group
• In the right-hand pane, associate the Tax Rate with the Region

To implement Tax Regions

• In the Manager > Products > Pricing window, select the Tax Group that applies to the Product
• On Customer cards, click the Shipping Info dropdown menu
• Select the Tax Region that applies to the customer

The Tax report will show the sales tax collected for each tax authority

Notes

1. Sales tax information configured in Checkout is not used in Shopify. Shopify sales tax information is configured through the Shopify admin login.