General Tax Settings

The following instructions take you through the basic tax configuration for your Magento installation. Before setting up your taxes, make sure that you are familiar with the tax requirements of your locale. Then, complete the tax configuration according to your requirements.

Admin permissions can be set to restrict access to tax resources, based on the business “need to know.” To create an Admin role with access to tax settings, choose both the Sales/Tax and System/Tax resources. If setting up a website for a region that differs from your default shipping point of origin, you must also allow access to the System/Shipping resources for the role. The shipping settings determine the store tax rate that is used for catalog prices.

To configure the general tax settings:

  1. On the Admin sidebar, go to Stores > Settings > Configuration.

  2. For a multisite configuration, set Store View to the website and store that is the target of the configuration.

  3. Complete the following configuration settings. If necessary, clear the Use System value checkbox of any settings that are grayed out.

Tax Classes

  1. In the panel on the left under Sales, choose Tax.

  2. Expand the Tax Classes section. Then, do the following:

    Tax Classes

    • Tax Class for Shipping — Set to the appropriate class. The default classes are: None and Taxable Goods
    • Default Tax Class for Product — Set to the appropriate class. The default classes are: None and Taxable Goods
    • Default Tax Class for Customer — Set to the appropriate class. The default class is: Retail Customer and Wholesale Customer
  3. When complete, click Save Config.

Calculation Settings

  1. Expand the Calculation Settings section. Then, do the following:

    Calculation Settings

    • Tax Calculation Method Based On—Set to one of the following:
      • Unit Price — The price of each product
      • Row Total — The total of the line item in the order, less discounts
      • Total — The order total
    • Tax Calculation Based On—Set to one of the following:
    • Shipping Address — The address where the order is to be shipped
    • Billing Address — The billing address of the customer
    • Shipping Origin — The address that is specified as the point of origin for your store.

    • Catalog Prices — Set to Excluding Tax or Including Tax
    • Shipping Prices — Set to Excluding Tax or Including Tax
    • Apply Customer Tax — Set to one of the following to determine whether tax is applied to the original or discounted price: After Discount or Before Discount
    • Apply Discount on Prices to one of the following to determine if discounts include or exclude tax: Excluding Tax or Including Tax
    • Apply Tax On Set to Custom price if available or Original price only
    • Set Enable Cross-Border Trade to one of the following:
      • Yes — Use consistent pricing across different tax rates. If the catalog price includes tax, choose this setting to fix the price regardless of the customer’s tax rate.
      • No — Vary the price by tax rate.

        Important: If cross-border trade is enabled, the profit margin changes by tax rate. Profit is determined by the formula (Revenue - CustomerVAT - CostOfGoodsSold). To enable cross-border trade, prices must be set to include tax.

  2. Expand the Default Tax Destination Calculation section. Then, specify the country that is to be the default for tax calculations.

    Default Tax Destination Calculation

  3. When complete, click Save Config.

Price Display Settings

Important! Some combinations of settings related to a price display that both includes and excludes tax can be confusing to the customer. To avoid triggering a warning message, see the recommended settings.

  1. Expand the Price Display Settings section Then, do the following:

    Price Display Settings Price Display Settings

    • Display Product Prices in Catalog—Set to one of the following:

      • Excluding Tax — Catalog prices that appear in the storefront do not include tax.
      • Including Tax — Catalog prices in the storefront include tax only if a tax rule matches the tax origin, or if the customer’s address matches the tax rule. This might happen after a customer creates an account, logs in, or uses the Estimate Tax and Shipping tool in the cart.
      • Including and Excluding Tax — Catalog prices that appear in the storefront are displayed both with, and without tax.
    • Display Shipping Prices — Set to Excluding Tax or Including Tax or Including and Excluding Tax

  2. Expand the Shopping Cart Display Settings section.

    For each of the following settings, choose how you want taxes and prices to appear in the cart, according to the requirements of your store and locale.

    • Display Prices — Set to Excluding Tax or Including Tax or Including and Excluding Tax

    • Display Subtotal — Set to Excluding Tax or Including Tax or Including and Excluding Tax

    • Display Shipping Amount — Set to Excluding Tax or Including Tax or Including and Excluding Tax

    • Set the following to either Yes or No, according to your needs:

      • Include Tax in Order Total
      • Display Full Tax Summary
      • Display Zero Tax Subtotal

    Shopping Cart Display Settings

  3. Expand the Orders, Invoices, Credit Memos Display Settings section. Then, do the following to specify how prices and taxes appear in orders, invoices, and credit memos.

    • Display Prices — Set to Excluding Tax or Including Tax or Including and Excluding Tax

    • Display Subtotal — Set to Excluding Tax or Including Tax or Including and Excluding Tax

    • Display Shipping Amount — Set to Excluding Tax or Including Tax or Including and Excluding Tax

    • Set the following to Yes or No, according to your requirements:

      • Include Tax in Order Total
      • Display Full Tax Summary
      • Display Zero Tax Subtotal

    Orders, Invoices, Credit Memos Display Settings Orders, Invoices, Credit Memos Display Settings

  4. When complete, click Save Config.