Tax Tab

This tab allows you to determine how you would like to handle taxes on your customers’ purchases.

 Figure 40

Figure 40: The Tax Tab allows you to determine how best to collect taxes for your Merchant Shop

Given that most governments are rather unforgiving when it comes to collecting taxes, it will probably be a smart option to enable taxes and tax collection on your customers’ purchases.  Keep in mind that it is up to you to save this money back for the time when you will need to send your tax money in to the appropriate agencies.  The last thing you want is for the tax collector to come looking for you!

If you are selling a downloadable product, your products may be exempt under the Internet Tax Freedom Act (ITFA).  However, you should do some research and find out before you decide not to add tax your customers’ purchases by asking your accountant.

Enable Taxes and Tax Calculations
Not every state collects the same amount of taxes, and some don’t collect for online purchases at all!  The built in-tax calculator does this work for you, providing tax information, based on the customers location input by zip code.  Taxes will be calculated at the time of purchase and based on the shipping address of the product.  For more about when to tax and how much, you can read more about this topic at Outright.com.

Prices Entered With Tax
This is an important decision you will need to make.  Most online shops list the prices of their items without taxes included.  Should you wish to include taxes with each item, you will need to calculate the tax on each item manually.  If you have a chart showing state and city taxes around the country, you can do this fairly easily.  However, not knowing where the product is going ahead of time makes this task incredibly difficult and it is recommended that you allow the system to calculate your customers’ taxes at the time of checkout.

Calculate Tax Based On
In the US, Physical products purchased online are taxes based on where the goods are being sent, or the shipping address.  However, depending on where your Merchant Shop is based, you may need to collect taxes based on the billing address, or your own Merchant Shop address.

Default Customer Address
This should be set to your business’ physical address. Because there is no way to calculate sales tax prior to knowing the customers’ shipping address, this address will be temporarily used until the customer inputs their shipping address at checkout.

Round Tax at Subtotal rather than rounding per line
This option allows you to decide whether to round up your tax on each line item (unchecked) or round up at the subtotal line (checked) before your customer checks out. The calculations will end up being just slightly different, but can add up over time, so it’s a good idea to ask your accountant how you are required to calculate tax.

Additional Tax Classes
This field allows you to manually enter tax classes not listed in the Shipping Tax Class option.  Use this only if your country or state has alternate rules regarding taxes and shipping such as Value Added Tax (VAT). Again, if you are unsure of what your default tax class should be, you should take the time to ask your accountant.

Display Prices during Cart / Checkout
This gives you the option of including or excluding taxes prior to customer checkout.  Customers will be able to see the amount of tax prior to purchase.

Again, at the bottom of the “Taxes” tab is the “Save Changes” button.  If you have made any changes to the information on this page, make sure you click this button before leaving this page.

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Category: Chapter 3 - Setting up Your Merchant Shop

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