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Setting Up Taxes in WooCommerce

There are some obvious concerns surrounding taxes and how it could convolute your business if done wrong.

It is necessary to work out taxes, duties, and other legal obligations of the country/state your business is currently situated in. While it is essential to set up accurate tax settings, people don’t usually get along with the idea of setting it up on their own.

WooCommerce can’t go over your accounts. You should consult your account for that. What it can do is offer settings that allow you to abide by the local taxing rules. WooCommerce offers essentials features that simplify the overall process, making your life easier.

First and foremost, you need to open the WordPress Dashboard and click on WooCommerce→Settings. This will take you to the General setting page of your WooCommerce plugin.

Once you’re there, you need to scroll down and click on the Enable taxes option as displayed in the image above. You then need to click on the Save changes option. Doing this will automatically create a new tab labeling Tax. This is a one-time setup and you can now directly go to the WooCommerce Tax option. By following, WooCommerce → Settings → Tax.

You then need to click on the Tax tab that is right next to the Products tab, and there you are.

The Tax tab looks like the screenshot above.

Now that you’re in, it’s time to go in deeper and understand each and every option.

You need to figure out how do you want WooCommerce to calculate the taxes. There are two options hereinafter —

Yes, I will enter prices inclusive of tax: Choosing this option will allow you to calculate prices inclusive of your store’s base tax.

Example: Let’s say you’re in the U.S; your customer selects an item worth $20 which includes $2 as the tax. So customers from within your country will have to pay $20, but a customer outside of your country would only pay $18.

No, I will enter prices exclusive of tax: Choosing this option will allow you to calculate prices exclusive of tax. This way you’d have to calculate tax as an additional price which will be displayed during the Checkout step.

Example: Taking the same example above, customers from your country would find the cost of the same item at $18. When they move it to the Cart, the tax worth $2 will be applied making the total payable cost, $20.

Now you come down to the next option. Here, you can determine which location you are using to set up your tax form. You have three options to choose from. You can access them from the drop-down as shown in the image below.

Shipping tax class will determine which Tax class will be applied for the shipping. Let’s say you have an item that should be shipped at a reduced rate then you need to select the Reduced rate option from the drop-down.

Usually, shipping tax class is based on the products in the Cart. So if anyone of your buyers adds a product that is categorized as a different tax rate then the tax for the shipping will also be calculated at a similar rate. But if your tax jurisdiction doesn’t comply then you can obviously go for another tax class.

You can select the appropriate tax class from the drop-down list as shown in the image below. Your own tax class that you might’ve defined earlier will also appear in the same drop-down.

Now let’s take an example and see shipping tax class in action. Assume that standard tax rate percentage for shipping items to the zip code 30301, Atlanta, Georgia, is 7.75% while shipping to the zip code 30302 is 8.9%. We define these rates in the Standard rates section under the Tax tab as shown in the image below.

So now let’s see the shipping tax rate for zip code 30301,

Now let’s see for 30302,

As you can see the taxes are being displayed separately, and the taxes at both the address are different, as configured in the plugin settings.

With this option enabled, you can allow tax rounding on the Cart page. You just have to tick the option if you want to round the calculated tax at the sub-total level rather than the default rounding per line option.

WooCommerce allows you to create additional tax classes. These tax classes can be further configured based on your tax requirements. As you might have already noticed earlier before, WooCommerce comes with the additional tax classes, i.e, Reduced Rate and Zero Rate.

So in order to create a new tax class, you have to enter the tax name in the text field first. Let’s go ahead and enter “New Tax Class” in the field.

As soon as you create a new tax class, you need to then click on Save changes. Thereafter, you would find a new section as displayed in the image below.

You can set the rate for the newly created tax class(New Tax Class) by entering all the required data. Please refer to the image below.

This option will allow you to modify how the taxes will appear on the website. Here, you have two options — Including Tax, and Excluding Tax. These taxes with appear on the front-end of your online store where your products are listed. Let’s see some examples.

The image above shows an item excluding the tax, while the image below shows product price including the tax.

Next, there are two settings where you can determine whether prices will be displayed inclusive or exclusive of tax on your Cart/Checkout pages. You again have the options — Including tax, and Excluding tax.

Let’s take an example and see it working.

The above image shows the total cost inclusive of the tax while the image below shows exclusive of the tax.

This option helps to display text after the price of your products. This can be something like “inclusive of VAT.” Let’s take an example and see it working.

As you can see in the image above, the prices are shown along with the text that we had defined earlier.

Finally, you can set how to Display Tax Totals during checkout — whether to display multiple taxes clubbed together as one total or each one listed as a separate item. You can choose ‘As a single total’ or ‘Itemized’ from the drop-down. Please refer to the image shown below.

Once you complete updating the settings, do not forget to click Save changes button.

There you have it! We have covered the basic tax settings in WooCommerce. Your tax calculations are dependent on the legal obligations of your store base and selling location.

We hope this article would have helped you set up taxes on your WooCommerce-based store. Do let us know in the comments section below about how you feel about it. We would love to hear from you.

Happy selling!

How to Maintain Personal and Professional Growth After an Unexpected Setback

Setting Up Taxes in WooCommerce

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