The Beginners Guide to WooCommerce Taxes

The Beginners Guide to WooCommerce Taxes

Now that we've finished looking at WooCommerce Products and their associated settings, let's look into the tax configuration options for WooCommerce.

Tax Settings

Being an online store owner you will never want to mess up with taxation rules and issues. WooCommerce helps you in this respect by offering variety of options to address all tax settings that may vary in reference to your country and individual shop requirements.

One can find these options at: WooCommerce -> Settings
-> Tax
. Right after entering the Tax settings tab you will see a main
section for tax settings along with three different tax classes. These are:

  • Tax Options
  • Standard Rates
  • Reduced Rate Rates
  • Zero Rate Rates

Tax Options

Enable Taxes

If you enable this option, WooCommerce will start calculating taxes for you. If you do not want this to happen then there is no need to configure other
options in this section and you need to leave this uncheked.

Prices Entered With Tax

If you enter the prices inclusive of tax then select Yes. If you don't do that and want WooCommerce to calculate tax on your behalf then select No. It
is quite a common observation for customers that whenever they buy something
the price tag displays either the Gross Price - which is the inclusive tax - or the Net Price - which does not include tax.

WooCommerce offers two different checkboxes
in this respect.

  • Yes, I will enter prices
    inclusive of tax.
     This option will mean that all the entered prices
    include a certain amount of base tax rate in them.
  • No, I will enter prices
    exclusive of tax.
     This option will mean that all the entered prices do
    not include the amount of base tax rate in them. In this case, the customer will
    pay an amount slightly more than the displayed price if you choose to display the product price exclusive of tax. (Wait! Where we can choose that? We'll come to that later in this article).

Tax Calculation

No matter which option you choose WooCommerce offers a complete algorithm 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...

If a customer is placing an order
from another country then the taxation process depends on his country’s tax
rate. In this case, WooCommerce offers the option of ‘Calculate Tax Based On’ for
the calculation of tax, where three different types of addresses are available.

The following addresses are
available: “Customer Shipping Address”, “Customer Billing Address”, or “Shop
Base Address”. 
I guess they are pretty easy to understand.

Default Customer Address

An online store owner is completely unaware
about the location of any new customer who visits the store. The calculation
of taxes becomes quite difficult at that time. This option lets a store owner to display
prices by assuming a default location before any customer enters his actual
address. You will select ‘Shop base address’ (instead of ‘No address’) in this
case an automatic tax correction is applied once a customer enters his country as his base address.

Shipping Tax Class

The option for Shipping Tax Class will decide about which tax class does shipping gets. In most online setups ‘Shipping tax class based on cart items’ is considered to be the default setting which depends on the product tax rate. Apart from this ‘Standard, Reduced Rate and Zero Rate’ can also be applied. 

If the ‘Shipping tax class based on cart items’ is selected and your shopping cart contains products with different tax rates then the shipping costs will be taxed at a higher rate in accordance with the tax defined for a particular product and taking into consideration other factors like customer's country.

Rounding

This is another checkbox which means that taxes will be rounded to the nearest figure whenever the subtotal is calculated instead of doing it at every step.

Additional Tax Class

WooCommerce allows you to assign various default standard tax classes to the products. However, it also provides an opportunity to add some custom tax classes as well with the help of this setting. Additional Tax Classes allows you to create new tax classes with their own tax rates.

All you need to do is add a new row with the name of the new tax class in the textbox and then Save Changes.

Display Prices in the Shop

We have already discussed the difference in the gross price and the net price. The store owner can decide the format of the prices which will be displayed on the online store and can control it with this option. Two options are there: excluding Tax and including Tax. That's pretty much everything there is to this particular setting.

Price Display Suffix

WooCommerce allows you not only to display price of the products but also allows adding certain text right after your product prices. You can add some additional information with the help of this option E.g. you can add the text like “Inc. VAT (Value Added Tax Included)” or “Exc. VAT (Value Added Tax Excluded)”.

Display Prices During Checkout

This option is quite similar to the previously discussed setting i.e. ‘Display prices in the shop’. The only difference here is that the store owner can decide the format of the prices which will be displayed on their cart and checkout pages. 

The same two options are there as well: Excluding Tax and Including Tax. My suggestion is to choose the Including Tax option so that your customer knows how much he/she is paying for the product.

Display Tax Totals

Here you can configure how the tax totals will be displayed at the frontend

  • As a single total. Tax displayed as a total for group of items
  • Itemized. Tax displayed separately for each item

After configuring these settings Save Changes.

That's all for today. In the very next article, we will complete the configuration of our tax options. If you have any questions or feedback, use comments area to let me know.

Source: Tuts Plus

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