Manually Adding a Tax Rate

Last Updated: Jun 17, 2014 05:24PM EDT

Overview


When you cannot or do not want to use a tax database to calculate taxes on your orders, ProductCart allows you to manually enter tax rates and charge taxes based on the customer’s location (but not necessarily his or her postal code), products, or a specified geographic zone.

Manually adding tax by zone is the newest and most flexible way to apply taxes to your store. Originally designed with Canadian taxes in mind because of the different levels of federal and local taxes that need to be applied in this country, this method has been used in many different creative ways such as adding on surcharges to certain products and/or categories. For stores doing business in countries with similarly complex tax rules as Canada, we strongly recommend using the zone method described below.

The first configuration steps are the same for all three manual tax methods (location, product and zone). Click on Enter tax rates manually on the Tax Options window. If you are using a Tax Database, click on Switch to Manual Tax Calculation. Next, configure the following settings:
  • Include shipping charges. You can include shipping charges and/or handling fees in the calculation. As mentioned above, typically shipping charges are excluded, but handling fees are taxable.
  • Include handling fees. See above.
  • Base the calculation on the billing vs. shipping address. Typically, the shipping address is the one that should determine which tax rate should be applied, if any.
  • Display taxes separately. Since you have the ability to enter more then one tax rule, now ProductCart gives the option to display those taxes separately to the customer. For example, Canadian customers can use this feature to separately display federal and province tax.

When you are done, click on the Update & Continue button.

The next screen asks you to choose whether you would like to add a tax rule based on product, location, and/or zone, and it also provides a link to view existing tax rules. Let’s review the different options.
 

Add tax by location


To add a tax rule that applies taxes to an order based on the location where the customer resides:
  1. Click on Add tax by location
  2. Set the tax rate (to add a 6.5% tax rate, simply enter 6.5)
  3. Define the geographic limitation by selecting a postal code, a US state or a country.

You can have multiple tax rates working at the same time. Use the description field to enter a label for this tax (useful when taxes are displayed separately).


Add tax by product

To add a tax rule that applies taxes to an order based on the shopping cart content:
  1. Click on Add tax by product
  2. Select a product from the drop-down menu
  3. Set the tax rate (to add a 6.5% tax rate, simply enter 6.5 )
  4. Define a geographic limitation by selecting a postal code, a US state or a country.

You can have multiple tax rates working at the same time, so that you may cover all products that fall into a certain product category, for example.

ProductCart does not apply the tax by location on a product for which a tax by product has been entered, thus avoiding double taxation. In other words, when the shopping cart contains a combination of products for which a tax has been specified, and products for which it has not, ProductCart first applies the tax by product, then applies the tax by location (if any) on the rest of the products, unless they are tax-exempt. The tax added to the order is the sum of all taxes calculated on the shopping cart content.
 

Tax by zone


Adding tax by zone is a two-step process. The first step is defining one or more tax zones and the second step is adding/editing a tax rule which will be applied to one or more zones.
 
Defining a zone
A zone is made up of the following elements:
  1. A geographic area that consists of a country and a state or province contained in that country. The states and countries are pulled from your State and Country lists that are setup in your store.
  2. A name which is easily identifiable to you. This name will not be shown to the customer; it is for the store owner’s reference only.

After you have completed defining your zones, click on the Complete Tax Zone Configuration button to close the window and refresh the existing Control Page with the new information. If the page does not refresh automatically, you can click on the “refresh” page button in your browser or click on the F5 key on your keyboard.
 
Add/Edit tax rule by zone
Once you have defined one or more “zones” you will be able to apply a new tax rule definition. The definition has the following components:
  • The tax rule description will be shown in the storefront to your customers and will display on the order summary page and on any invoices or order detail pages. It should be a description of the tax or fee that you are applying to the order. This is a required field.
  • The tax rule type is solely for your own reference so that you can quickly see what type of tax this is that you set up. An example would be “BC GST” referring to British Columbia and Goods and Services Tax in Canada. This is a required field.
  • The tax rule rate is the actual percentage rate for this zone. This field is required and must contain a whole number and not include the percentage symbol (%).
  • Use tax rule order if you are creating multiple zones that will contain same state/province to apply an order number to each one. This will tell the system which tax rule to apply to the order first. This is very important if some of the taxes are taxable. This is an optional field.

Optional Check Boxes:
  • Enable apply tax to shipping & handling if you want your zone tax to apply to the shipping & handling fees of an order.
  • Enable apply this tax only to customers in the same state/province as your store only if you wish to apply your zone tax to customers that are located in the same state/province as your store address is located. For example, this feature can be used to apply a local tax only to local sales.
  • This tax is taxable. In some countries there are taxes that need to be tax by an additional tax. For example: In Quebec the local tax is applied to the order total plus the federal tax, whereas in Ontario both taxes are calculated only on the order total.

When applying the this tax is taxable option to a zone, make sure that the Order of the zone is before any other taxes for the same zone. This will ensure that the tax is properly taxed by the other tax rates by zones you have setup.
 
Tax rules by zone and customer exemptions
This feature allows you to exempt select customers from paying tax. To access this feature, click on the link to modify your tax rule by zone from the tax summary page and click the button located at the bottom of the modify page that reads view/edit customer exemptions for this tax. You can then add new customers or remove existing customers for the tax rule that you are modifying.

Tax rules by zone and category or product exemptions
You can create an exemption list for each tax rule by zone that includes specific products or categories. To access this feature, click on the link zone-specific product/category tax exemptions for tax by zone rules from the tax summary page.

The first time you view this page click on the Add New Rules button to get started. The following two items are included in this page:
  • Rule/Zone A drop-down will list all of your current tax rules by zone. Choose which tax rule by zone you wish to apply the exemption to.
  • Exemptions by Products & Categories This option allows you to select individual products, entire categories of products, or a combination of both, from which to apply an exemption from a tax rule by zone.
 
Additional tax by zone exemption settings not available through the Control Panel
It has come to our attention that there are different interpretations on proper taxation when a cart contains both products that are set as exempt from a certain tax rule by zone and products that are not exempt. Some store owners believe that taxes are applied to all the products when a “non-exempt” product is in the cart, while others believe those exempt products should never be charged the tax they are exempt from. Again, we recommend that you seek expert tax advice to consider your specific situation. To allow for these differences in interpretation, we have created a hard-coded flag in the file called orderVerify.asp located in the pc folder. Towards the top of this page, locate the following code:
intTaxExemptZoneFlag="1"
Change the “1” to “0” if you want to tax any tax zone exempt products when they are added to the cart with taxable products. Keep the “1” in place to ensure that tax zone exempt products are never taxed for that zone.
 
Tax by zone for Canadian online stores
ProductCart includes features to help you correctly calculate taxes if you are a Canada-based ecommerce store. See Calculating Taxes in Canada with ProductCart.
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