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Retail Tax Calculations

Overview

Magento Go allows you to set tax zones and rates, tax classes for products and customers, and tax rules for your store.

This example provides instructions for setting up taxes for retail customers and taxable goods for Los Angeles County, California. To set up taxes in your store you follow these general steps:

For field descriptions, see Configuration: Sales - Tax

Step 1: Set up a tax rate

Step 2: Set up a product tax class

Step 3: Set up a customer tax class

Step 4: Set up tax rules

Step 1: Set up a tax rate

To create a new example tax rate for Los Angeles County:

  1. To create a new tax rate go to Sales > Tax > Manage Tax Zones & Rates > Add New Tax Rate. Create a new tax rate for Los Angeles County, California. For example, the sales tax rate charged in Los Angeles County is 9.75% (Note: This is for example purposes only. Consult your state laws for tax rates.) You have the following options:
    image

    Fill out the specified information:

    • Tax Identifier: This is the title of the newly created Tax Rate. Do not use spaces. This identifier is not shown on the web store if the Tax Titles section is filled in.
    • Country and State: Select the Country and State to which the specific tax applies.
    • Zip/Post is Range: Select Yes if you want this tax applied to a specific range of zip codes.
    • Range From / Range To: In this case we have the ranges of zip codes for Los Angeles County.
    • Rate Percent: Specify the tax rate you want to have applied.
    • Tax Titles: You also have the options of using Tax Titles. This scenario applies only if you have a store in different languages and you want to have the languages displayed differently.
  2. Click the Save Rate button on the Add New Tax Rate tab. You are taken to the Manage Tax Rates section:< br /> image
  3. You can now see the Los Angeles Tax rate displayed.

Step 2: Set up a product tax class

Product Tax Classes define which types of taxes are applied to a product.

To set up an example product tax class for taxable goods:

  1. Create a new product tax class for a simple taxable good by going to Sales > Tax > Product Tax Classes > Add New. Set the following options:
    • Class Name: Specify a name for your tax class.
  2. Click the Save Class button on the New Class tab. You are taken to the Product Tax Classes section:
    image

    You can now see the Taxable Goods class displayed.

  3. Apply the Taxable Goods class to an actual product from your catalog by going to Catalog > Manage Products. Select a desired product from your catalog and you see the following options:
    image
  4. Select your newly created tax class called Taxable Goods and click Save.

Step 3: Set up a customer tax class

Customer Tax Classes define which types of taxes are applied to customer groups.

To set up an example customer tax class for a retail customer:

  1. Create a new Customer Tax Class for a retail customer by going to Sales > Tax > Customer Tax Classes > Add New. You have the following options:
    image

    Fill out the specified information:

    • Class Name: Specify a name for your tax class.
  2. Click Save Class on the New Class tab. You are taken to the Customer Tax Classes section.
  3. You can now see the Retail Customer class displayed. Apply the Retail Customer class to an actual customer group from your store by going to Customer > Customer Groups. Select your newly created tax class called Retail Customer and click Save.
  4. Apply the Customer Group to an actual customer from your store by going to Customers > Manage Customers. Select a desired customer from your store and in the Account Information, select your customer group called Retail Customer and click Save.

Step 4: Set up tax rules

Tax Rules are defined as a combination of a Customer Tax Class and a Product Tax Class with a Tax Rate & Zone. In other words, based on the class of the customer (Customer Tax Class), the class of the products (Product Tax Class) in the shopping cart, and the region (Tax Rate depending on the shipping address, billing address, or shipping origin), the system calculates the appropriate tax for each order.

To set up an example tax rule:

  1. Create a new Tax Rule for your Los Angeles County retail customers by going to Sales > Tax > Manage Tax Rules > Add New Tax Rule. Fill out the specified information:
    • Name: Specify the Tax Rule title.
    • Customer Tax Class: Select Retail Customer.
    • Product Tax Class: Select Taxable Goods.
    • Tax Rate: Select Los Angeles Tax.
    • Priority: Specify the priority of this tax, when more than one tax applies. If two tax rules with the same priority apply then the taxes are added together. If two taxes with a different priority apply then the taxes are compounded.
    • Sort Order: Select the sorting order desired.
  2. Click the Save Rule button to save your settings.

    Retail customers with a shipping address in Los Angeles County are charged a rate of 9.75% on all items marked as being Taxable Goods.

See also:

Understanding Tax Settings

Video: Set Tax Calculation

Video: Optimize Your Tax Settings

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