Tax seems like a complex matter with almost online store owners. But WooCommerce can help you in this respect by offering various options to address all tax settings that may vary in reference to your country and individual shop requirements. So, in this lesson of the guide to setting up an eCommerce website by the WooCommerce WordPress Plugin, we will talk about WooCommerce taxes system and how it can be run for your business.
First of all, to access the WooCommerce tax settings screens, you have to enable them.
- Go to WooCommerce >> Settings.
- Select the Enable Taxes checkbox.
- Press Save changes.
Ticking this box is very important because it tells WooCommerce that you want to collect taxes. If you do not enable taxes, all subsequent settings are irrelevant.
To find the Tax Options, simply go to WooCommerce >> Settings >> Tax
Then, the subsection Tax Options will be opened first:
The following settings are available:
Prices Entered With Tax:
This option is most noteworthy because it will affect how you input product prices later on. Changing it will not update existing products. You have two choices. You can set the prices entered with tax by ticking the boxes marked Yes or No. Taxes will be added depending on which box you tick.
– “Yes, I will enter prices inclusive of tax” means that all the entered prices include a certain amount of base tax rate in them.
For example, assume that your store is located in an area with a 10% tax rate. You enter a product price of $10 that includes $1 tax. Customers in your tax jurisdiction will pay the full $10 while customers outside of your jurisdiction would only pay $9.
– “No, I will enter prices exclusive of tax” means that all the entered prices do not include the amount of base tax rate in them.
Using the example above, your store would enter $9 at the product price. A tax of 10% would be applied on top of this during checkout making the amount payable $10 for customers in your tax jurisdiction and $9 for customers outside of your jurisdiction.
No matter which option you choose, WooCommerce offers suitable formulas to calculate the price with or without tax. Here is the method for it:
Tax calculation for gross price (inclusive tax) is:
Tax amount = price – ( price / ((tax rate % / 100) + 1))
Tax calculation for net price (exclusive tax) is:
Tax amount = price * (tax rate % / 100)
Calculate Tax Based On
This option determines which address is used to calculate the tax. The following options are available: “Customer Shipping Address”, “Customer Billing Address”, and “Shop Base Address”. I guess they are quite easy to understand.
Shipping Tax Class
Shipping Tax Class can be based on cart items, Standard Rate, Reduced Rate or Zero Rate. Most shipping taxes are inherited from specific items, but it can be altered if you feel you need to change it.
This box means that taxes will be rounded to the nearest figure whenever the subtotal is calculated instead of doing it at every step.
Additional Tax Classes
New classes with their own tax rates can be easily created by using the menu item Additional Tax Classes. And all you need is add a new row with the name of the new class in the field Additional Tax Classes and then press Save Changes.
Display Prices in the Shop
This option determines how prices are displayed in your store/catalog. Choose including tax or excluding tax.
Display Prices During Cart and Checkout
This option is quite similar to the previously discussed menu item ‘Display prices in the shop’. The only difference here is that the shop owner can decide the prices’ formats which will be displayed on their cart and checkout pages.
Price display suffix
This option allows you to add text to follow the prices of your products. Add them by using the code displayed below. You can add some additional information with the help of this option. For example, you can add the text like “Inc. VAT (a.k.a Value Added Tax Included)” or “Exc. VAT (a.k.a Value Added Tax Excluded)”.
Display Tax Totals
Display Tax Totals allows you to choose to display tax totals as one list or itemized.
- As a single total – Tax displayed as a total for a group of items.
- Itemized -Tax displayed separately for each item
This depends on how many different tax options you have for each of your products. If you have a few, it is best to leave it as itemized.
After configuring these settings, press Save Changes.
Set up new WooCommerce taxes
You’ve just configured your tax settings. The next step you need to do is add tax rates for each jurisdiction where you are obligated to collect taxes.
To set Standard Rates for Taxes, go to WooCommerce –> Settings -> Tax -> Standard Rates, then click “Insert Row” to get started.
You have to fill these fields: Country Code, State Code, ZIP/Postcode, City, Rate %, Tax Name, Priority, Compound and Shipping to the row before saving it.
Each tax rate has the attributes below:
- Country Code – 2 digit country code for the rate, e.g US. Leave blank to apply to all countries. List of country code in here
- State Code – 2 digit state code, e.g AL. Leave blank to apply to all states. List of U.S state abbreviations in here
- ZIP/Postcode – Postcodes for this rules. Semi-colon (;) is used to separate multiple values. Leave blank to apply to all areas. Wildcards (*) and ranges to for numeric postcodes (e.g 1234….7865) can also be used.
- City – Cities for this rule. Semi-colon (;) separated multiple values. Leave blank to apply to all cities.
- Rate % – Enter the tax rate (%) to 4 decimal places.
- Tax Name – Enter the name for this tax rate.
- Priority – Choose a priority for this tax rate. Just only 1 matching rate per priority will be used. To define multiple tax rates for a single area you need to specify a different priority per rate.
- Compound – Choose whether or not this is a compound rate. Compound tax rates are applied on top of other tax rates.
- Shipping – Choose whether or not this tax rate also get applied to shipping.
Repeat the process of these steps in Standard Rates for “Reduced Rate Rates” and “Zero Rate Rates”, which are the 2 last options of the navigational toolbar under “Tax” on the Settings page.
After configuring all the settings, press Save Changes.
That’s all for today. I believe after this lesson, all of you surely can set up WooCommerce taxes on your eCommerce websites easily. If you have any questions or feedback, please use the comment area to let me know.
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