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Automatic Tax Calculations

For users in the US, Canada, Australia and Europe, Store calculates the tax rates automatically based on the store and customer's location. Upon checkout, the customer will be charged a proper tax rate according to country and regional tax rules.

Tax laws are constantly changing. Country, state or even city government may apply new tax rates that a business owner is expected to keep up with. Store will always stay up to date on the tax law.

Note

This feature is only available on the Advanced Store and higher.

Configure Automatic Tax Calculations

To configure automatic tax calculations:

  1. In the left panel click eCommerce, and then click Manage Store.
  2. Click Settings, and then click General.
  3. Scroll to Company Address and enter the company address in the fields provided. This address is needed to calculate and apply the correct tax rate to the order at checkout.
  4. Click Save.
  5. Click Taxes in the left panel.
  6. Enable Automatic tax rates.

Once enabled, the automatic tax rate will determine a precise tax rate at checkout depending on where you and your customer are located. The tool knows the tax rules in your country, state and even county and city and applies them properly to each order:

  • Whether you are located in a region with origin-based or destination-based tax schema.
  • Whether shipping cost or discounts are taxable.
  • Whether you should charge tax in another state or country not.

The tax rate is calculated with a zip code accuracy. If your customer provide zip+4, it will be calculated with even higher precision. In some states (and the number of such states is growing), the tax is calculated with a street address level precision.

Note

By default, automatic taxes are applied to both the subtotal and shipping. To exclude taxes from the shipping cost, you must create manual tax rates.

FAQs

I set up automatic taxes, but get orders with zero taxes charged

If you’ve set up automatic taxes and get orders with zero taxes charged, check the addresses of the customers who placed those orders. You must collect sales tax only from buyers from your state or from states where you have nexus. So, if a customer is not from your state, it is fine that they are not charged any tax.

In simple words, you must charge applicable taxes only from customers who come from the same state as your company. For example, say your company is located in Texas. When a customer from Texas places an order in your store, they are charged a tax. If a customer is from New York or any other state (that is, not from Texas), they won’t be charged any tax.

If you have nexus in several states, set up multi-state nexus to charge taxes correctly.