Set up Tax in WooCommerce

How to Set Up Taxes & How Does Tax Work and Manage in WooCommerce?

Irrespective of the type of business you run, taxes are an important part of it. While you charge your customers a certain amount of money in the form of taxes, you are also expected to pay a significant percentage of your income as a tax. But what is a tax? And how is it related to your WooCommerce store? Don’t worry! This article will cover all you want to know about tax and how to manage them in WooCommerce.

Why to Set up Taxes for WooCommerce?

Tax relates to the financial aspect and is one way the government earns money. It is believed that taxes are of primal importance and that it is one of the things that regulates the development, and economic progress of a nation. With taxes coming into play, governments are in a better position to design and build huge infrastructures starting with schools, roads, and other institutions for the welfare of the society. 

When it comes to the retail sector, store owners and operators are expected to levy sales tax on the purchase of goods. The money collected in the form of tax is given directly to the government. While having a physical store makes it easier for both the buyer and the seller to pay/collect taxes, things heat up when you need to deal with an online store. 

But that’s just one way of saying, you must know how to integrate, setup, and manage the taxes in your WooCommerce store. Here again, let me remind you that this article is all about taxes in the WooCommerce store. So don’t worry about how. Instead, put your seatbelts on to ride through the journey of managing taxes in your WooCommerce store.

Requirements

Starting from scratch, we would need to have a WordPress website with a WooCommerce plugin already installed so that we dive into the process of setting up tax in WooCommerce.

  1. You must have a WordPress website, an account with all the necessary credentials.
  2. The WooCommerce Plugin installed and activated on the WordPress site.

How to Set up Tax in WooCommerce?

Considering that you have the prerequisites in place, let’s begin with the first and the most important thing: set up a tax option in your store.

Enabling Taxes

To edit or modify the tax settings, we first need to make sure that your store has taxes enabled for every purchase. To do so,

  1. Move to the WooCommerce dashboard and click on Settings. Select General.
  2. Here move down to find the option of Enable taxes.
  3. Click on the checkbox to enable tax fares and calculations.
  4. Finally, click on Save changes.
Enabling Taxes

Configuring Tax Options

The next step is to configure taxes:

Move down to the WooCommerce dashboard and then to Settings. Click on Tax. Only when you have the taxes enabled will you find this option.  The screen that opens up will have multiple fields that you need to configure. This section will cover all the details on how to configure taxes, with the field given below. 

Configuring Tax Options

Prices Entered With Tax

The option is one that gives you the ease to predetermine whether the product price is inclusive of taxes or exclusive. The field has two radio buttons. 

  1. “Yes, I will enter prices inclusive of tax”: if you select this option, you can calculate prices along with the base tax of the store in the final price.
    Example: Consider that you are based out of New York. For a product of price $17, you have $3 as the tax. If someone outside your country purchases the product, he/she is liable to pay $14. However, customers from your country would pay $17.
  2. “No, I will enter prices exclusive of tax” With this option, all of the product prices displayed on the page are without the tax amount. Meaning that when they move an item to the cart, additional money is added in the form of taxes.
    Example: Extending the example we used above, in this case, the price displayed on the page would be $14. For buyers in the US, the checkout page has an additional row specifying the tax as $3 whereas, for others, it is $0.

Calculate Tax Based On

The next option is specifying the parameters that regulate the calculation process. Primarily, this option emphasizes the location. You have three main options to choose from:

  1. The shipping address: Taxes are calculated based on the shipping address.
  2. The store base address: Taxes are calculated based on the address of the store.
  3. The billing address: Taxes are calculated based on the customer’s billing address.
Calculate Tax Based On

Shipping Tax Class

The next field is the shipping tax class. This outlines the tax class to be applied to the shipping methods. Suppose that you want an item that has to be shipping at lesser rates. All you need to do is click on the drop-down and select the option of a reduced rate.

Normally, the shipping class is based on items added to the cart. But you can always change them to comply with the tax jurisdiction of the customer. 

Rounding

In case you wish to allow rounding of the taxes when added on the cart page, click on the checkbox just below the shipping tax class field.

Additional Tax Classes

The next tab is the Additional Tax Class. This is where you can add one or more tax classes, apart from the ones listed in the shipping tax class option.

To create a new tax class, what you need to do is enter “New Tax Class” in the additional tax classes field.

Additional Tax Classes

Once you do the above, click on Save Changes. As soon as the changes are reflected in the store, you will find an additional section added to the tax options. Just as the one we see below.

Configure the newly created tax class(New Tax Class) by filling in all of the appropriate data.

Display Prices in the Shop

This section gives you the ability to decide whether or not you should display the taxes on the checkout page. To put it this way, you can specify whether you want the price to be inclusive of taxes or exclusive. This is directly reflected in the price displayed on the product page.

Display Prices During Cart and Checkout

Similar to the option of displaying the price on the product page, you have the same option for displaying the price in the cart and during the checkout process. You can choose between pricing inclusive of taxes and prices exclusive of taxes.

Price Display Suffix

Wondered how will the buyers know if the product price is all-inclusive or has additional taxes? This is where the price display suffix seems appropriate. With this, you can specifically mention if the price is inclusive of taxes or not.

Choose between {price_including _tax} or {price_excluding_tax} to set the price display the way you want.

Display Tax Totals

Lastly, we have the option to Display Tax Totals while the buyer is advancing towards the checkout page. What this means is whether you want to have a single row of tax with all of the tax amounts or specifically mention each tax line after line along with their amount. Select from the drop-down, ‘As a single total’, or ‘Itemized’ to make your decision.

Display Tax Totals

After you have added all of the above in the desired field, click on Save Changes to reflect them in your WooCommerce store.

How to Set up Tax Rates?

Now that we are done with configuring the taxes, the next thing to do is set up tax rates for the WooCommerce store.

The different tax rates can be viewed under the tax options. You can simply click on one of the tax rates and then add details to configure the same.

How to set up tax rates
Not sure how to set up a new tax rate. This section will help you with it. Click on the tax option that you wish to add. Now, click on the Insert Row button just above the button to save changes.
tax option insert rwo button

Country Code –The first tab is the country code. Enter the two-digit country code relative to the rate. Refer to ISO 3166-1 alpha-2 codes. In case you wish to apply the same to all the countries, enter (*).

State Code – Following a similar notion, the next tab would want you to feed in the state code. Note that this again would be of two digits. In case you wish to have more than one state within the column, simply skip the tab and move to the next.

ZIP/Postcode –Here you need to enter the postal code of the region for which you wish to apply the taxes. There would be more than one zip code for a single region. So to enter all in the given box, enter and separate them with a comma. You can enter numerical ranges and also wildcards for the codes. For instance, if you wish to have all postcodes with the initials 80, you can enter 80*.

City – Assumably, the next is the tab that asks you about the cities. List out the names of the cities while separating them with a comma. If you wish to have all cities within a country, leave the field empty.

Rate % – Mention the rates or to put it this way, enter the tax rate. Note that the rare can be up to 4 decimal places. Like if you need to set a tax rate of 7%, enter 7.0000.

Tax Name – Feed in the name of the tax rate. It could be anything from Sales Tax to VAT.

Priority – If you have a single tax rate for a particular situation, it is obvious that the store would go with it. However, for cases when there are multiple tax rates applicable in a single case, you must set a priority for them. This is what you can do here.

Compound – When you define a tax rate that needs to be applied on top of all other taxes added in the store, you click on this box. For example, if you have an additional tax rate along with the conventional tax added to the cart, click on the checkbox here to apply them.

Shipping – Where few store operators prefer adding taxes to the product price, others add the same to both the product and the shipping rates. This field gives you the ease to select what to do. Selecting the checkbox specifies that taxes are applied both to the product and shipping rates. However, unchecking it would mean that the tax is applied only to the product price.

Finally, click on save changes to reflect them in the store.

How to Delete Tax Rates?

While the above was all about setting up tax rates in the WooCommerce store and further configuring it as per the needs, there are instances when you would need to delete a specific tax rate. Having a single tax rate option in your store makes it easier for you to track and delete the option. However, when you have several tax rate options within the store, you must find the appropriate one before executing the delete operation.

This section will help you understand how to delete the tax rate from the WooCommerce store. Follow the steps given below:

  1. Move to WooCommerce, and then to settings.
  2. Under the tax rate option, identify the different tax rates depending upon the country code and other details added.
  3. Select the row of the corresponding tax rates. Once done, the selected rows turn yellow.
  4. Click on remove selected rows to permanently delete the chosen tax rates from your online store.
How to delete tax rates

In case you want to delete all of the tax rates as displayed in the store, you can do it in a single operation.

  1. Move to the WooCommerce dashboard and then scroll down to the status option.
  2. Here click on tools and then move to ‘Delete WooCommerce tax rates’.
  3. Click on the Delete tax rate button to remove all the tax rates active/inactive in the WooCommerce store.

How to View Tax Reports?

Another operation that you can do and in fact, a majority of the WooCommerce store managers is viewing the tax reports. It is a pretty simple and easy process.

  1. Move to the WooCommerce dashboard and then scroll down to the reports option.
  2. Here click on taxes and then move to Taxes by data.
  3. Here you can view all of the tax reports for the timeline you have selected in the earlier step.
How to view tax reports

Alternatively, you can also generate reports for the taxes segmenting them based on their codes. Click on Tax by code on the top left corner to achieve the same.

Now that you have all information related to the WooCommerce tax rates. The next section highlights the top plugins that you can refer to and integrate within your WooCommerce store to optimize the performance and enhance the mechanism of tax rate configuration and application.

Best Plugins for WooCommerce Tax

Wondering how you can improve the tax management and set up for your WooCommerce store? Well, we have good news for you. Apart from all the WooCommerce tax options that are present by default, you can always step up the game by downloading plugins for the job.

This section does the job for you. Highlighting the top four plugins that you can consider when optimizing your store for tax rate calculation.

Top 4 sales tax plugins for WooCommerce

Avalara AvaTax

Avalara, one of the leading plugin development companies recently joined hands with WooCommerce to introduce a new plugin named Avalara Avatax. AvaTax is primarily a sales tax plugin and upon integration with the WooCommerce store, it facilitates the efficient calculations of sales taxes for the store. The plugin takes into consideration the data concerning geo-spatial mapping.

By default, the plugin is adjusted to specify the sales tax applied at the time of check out. The plugin comes with added features of conducting audits and embedding automation for the basic tasks. With AvaTax, you can be convinced that the calculation is accurate and that you no longer need to worry about setting and managing.
While the plugin provides its users with a 60-day money-back guarantee, it is recommended to pay for the plugin based on the volume of quarterly transactions in the company.

Features

  • Simplified management of tax rules.
  • Easy assessment of obligation on taxes across every state.
  • Automate collection of sales data from the
  • Woocommerce store.
  • Real-time Integration of taxes at the point-of-sale.
  • Pricing: Free

You can down the Avalara AvaTax plugin: Click Here

TaxJar

Next on our list is TaxJar. It is an excellent WooCommerce Plugin designed to provide tax rates for your store on a monthly basis. This is done to assure that the store is operating well and that the process of tax collection is done without any interruption. The backend of the plugin has most of the operations automated and it also facilitates the generation of reports in a timely manner. If required, you can also automate the process of filing state sales tax regularly. Note that this comes with an added fee.

Unlike AvaTax, TaxJar has a 30-day trial period offered for free. As a matter of fact, the plugin doesn’t require you to enter the details for your credit card too. Free from contracts or any hidden activation fees, the plugin is the best bet for startups and small scale companies.

Features

  • Automate the process of integration of taxes and filing returns.
  • Import sales taxes to determine whether you have met the monthly requirements
  • Build custom-fit sales reports, organize data and save manpower hours.
  • Follows order-based pricing policy.
  • Pricing: $19/month

Click Here to download the TaxJar extension.

Quaderno

Quaderno sales tax plugin is the third in our list and integrates well with the WooCommerce store. Leveraging the plugin, store owners can easily charge taxes from customers across the globe. The plugin adheres to the rules and regulations for tax collection for every country. After levying taxes, the plugin auto generates a tax receipt and can be downloaded by the customer.

What’s fascinating here is that the receipt can be accessed in multiple languages. Also, the plugin has an intuitive dashboard that facilitates the creation of custom-fit reports and even guides in the tax filing process.

Features

  • Compliance with local taxes across the globe.
  • Easy-to-use dashboard for revenue management.
  • Automated notes and receipts on every order.
  • Notifications and alerts.
  • Pricing: $49/month

Click Here to download the WooCommerce Quaderno extension.

Simple Sales Tax

If you are looking for a free solution, Simple SalesTax by TaxCloud is the best bet. It is one of the best and easiest tools for tax management. The solution provides real-time tax calculation facilities and all of these are done over the cloud. With simple SalesTax, you can generate custom-fit reports for the taxes.

Presently, a total of 24 states have the provision of using Simple SalesTax as their tax management solution. For those who seek to use the solution in limited states, the community provides them the ease to opt for a paid version.

Features

  • Setup and installation takes less than 15 minutes.
  • Fill taxes in around 24 states without any hassle.
  • Monthly reports and export them as per your requirements.
  • Pricing: Free

Use this link to download the Simple SalesTax plugin.

Conclusion

Having said all of the above, you can now get started with adding the option of taxes in your WooCommerce store, configure and manage them on the go. Also, check out the plugin and download the one that meets your purpose best. If you fear messing up the installation and setup part, or if you want expert consultation of choosing the best WooCommerce plugin for taxes, reach out to WPCustomify.