Defining tax for your eCommerce site

Configuring tax can be tricky to get right if you are setting up an eCommerce website in a country where the tax varies from county/state/region etc. It is important to define what the tax rules and zones are early on in a project if possible to ensure the desired result.

When planning an eCommerce website, there are often lots of questions that arise and tax is one of the areas that can get left behind. Magento makes it quite easy to set up tax, there are specific tax rules, zones and rates that can be configured depending on your requirements. However, things can become quite complex depending on the country you are trading in and whether other systems are involved to handle tax as well as Magento.

The following is a list of some questions that might arise depending on the requirements:

  • Will the products be inclusive or exclusive of tax on the store front?
  • How will the customer be informed about tax or shown the amount of tax?
  • If there is an ERP system being used alongside Magento, will tax be held in the ERP system as well or instead of Magento?
  • Will products come from the ERP system with tax already assigned to a product?
  • Are any customers going to be exempt from paying tax depending on their location?
  • If multiple stores across different countries, how does tax work in the required countries?
  • Does the tax vary across the country delivering to?

These are just a few points that are important to discuss when defining the requirements.

Below are some links to Magento Commerce with tips and instructions about how to set up tax in the backend of Magento:

What are Tax Rules and How Do I Use Them?

How do I Define Tax Rates per Product? (tax rules)

What are Tax Classes? (product and customer)

Tip: Importing Tax Rates