Setting Up Tax Rules in WooCommerce

Setting Up Tax Rules in WooCommerce – Everything That You Need to Know

When you are starting your online store for the first time, there is an array of things that you must know and take care of. Starting with the products you add to the pricing set, everything needs to be perfectly aligned to attract visitors and convert them to customers.

Of all of the modifications and configurations, one thing that often goes unnoticed is the tax rules and corresponding rates. It might so happen that you operate on a wide scale encountering customers from varied regions. It is necessary that the tax rules set for the store adhere to the standards and are in terms of what the customer expects.

In case you aren’t sure how to get along with the tax configuration process for your WooCommerce store, this article will give you a heads up. We have covered in detail the different aspects of WooCommerce taxes. Read till the end to understand better.

WooCommerce Taxes: Know to set different options

To begin with, you first need to visit the WooCommerce dashboard and hover to the end. Click on settings and then select Tax. This is where you can edit, modify, or customize all of the tax rules for your WooCommerce store.

The page displays different fields, each of which points to a particular purpose.

Case One: Apply tax rate to shipping charges

Consider that you want the taxes to apply on the total amount, i.e. the product price plus the shipping fee. To do this, you need to click on the name of the tax class.

Towards the end of the row, you will find a column as Shipping. This allows you to modify the shipping fee as taxable or not. Clicking on the checkbox will turn the shipping fee taxable.

Standards Tax Rates

Note: You can always limit the tax rules to a certain region, state, or country.

Case Two: Enabling / Disabling TAX

Suppose that you wish to disable taxes or simply free your store from all kinds of taxes. In this case, you need not deselect each and every tax rule. Instead, visit the settings page and deselect the checkbox of Enable Taxes.

Enable Taxes Calculaton

This however isn’t practical as every store must comply with the tax rules.

The above is a snapshot of the cart page after disabling the option of tax.

Case Three: Tax configuration

Similar to the above, when you want to enable taxes within your online store, all you need to do is visit the tax page and click on the checkbox.

Tax Configuration

Once you have enabled taxes for the WooCommerce store, you can now move ahead and configure the same as per your likes.

Prices entered with tax

The first field is Price entered with tax. There are two ways this option works. One is where the price displayed on the product page has the tax amount added to it. The other one is where the tax is specifically calculated on the cart page. Meaning that the one displayed on the product page doesn’t include the tax amount.

  • To enter prices including tax, select the first radio button, and
  • To enter prices excluding tax, select the second radio button
Tax Options Settings

Now when you select the first radio button, there are two options suggesting how the process is displayed on the cart page and the checkout page. Scroll down to the field that says, display prices during cart and checkout. Click on the drop-down and select including tax if you wish to have a display with prices that are inclusive of taxes.

prices during cart and checkout

This is how the cart page looks like when you select display price including tax.

Display prices excluding tax

In case you wish to have the first option but the store displays the price without tax, we select the first radio button and from the drop-down, we select excluding tax.

Display prices excluding tax
Cart & Checkout

Prices entered without tax

Similar to the above configuration, we can have the prices entered without tax and the display with or without taxes.

Display prices including tax

Select the second radio button and from the drop-down, select including tax. This means that the price on the product page doesn’t include tax and that they are added to the cart page separately.

select including tax

What’s the effect?

Display prices excluding tax

Last we have the option where the prices are:

  • entered without tax, and
  • displayed excluding tax
entered without tax

Select the second radio button and from the drop-down, select excluding tax. This means that the price on the product page doesn’t include tax and that they are added to the cart page separately.

displayed excluding tax

Calculate Tax Based On

The next field asks you to enter how the tax will be calculated. There are three different options available:

  • Customer billing address
  • Customer shipping address (default)
  • Store base address

Based on the option that you choose, the tax gets calculated.

Shipping Tax Class

This allows you to select which of the tax classes would be applied when calculating the shipping fee. By default, the rate that applies to the product is applied. However, you can always select one of the classes manually.

Rounding

For values that sum down to a floating-point number, rounding helps turn it into an integer value. You can choose from rounding at the subtotal level, or per line.

Additional Tax Classes

WooCommerce has one or two tax classes defined within the store by default. The most commonly used ones are the Standard class, Reduced Rate, and Zero Rate Tax class. However, there might come a time when you need to set custom-fit tax rates that abide by certain rules. This is where you can take help from the Additional Tax Class field.

All you need to do is enter the name of the tax class and then configure it as per the need.

Display Prices in the Shop

Select whether you wish to display prices on the shop page as inclusive or exclusive of taxes. Click on the drop-down to do the same.

Display Prices During Cart and Checkout

Similar to the above, this option allows you to select whether you wish to display prices on the cart/checkout page as inclusive or exclusive of taxes. Click on the drop-down to do the same.

Price Display Suffix

Just like you can specify whether the prices are inclusive or exclusive of taxes, you can also indicate whether the price has a suffix indicating if it includes tax or excludes the same. The two placeholders are:

  • {price_including_tax}
  • {price_excluding_tax}

Display Tax Totals

Lastly, the option determines that in case there are more than one tax rule applied, will they be listed separately or together as one item.

Configuring ZIP/Postcode Tax Options

Now that you know what are the different options to set up taxes, let’s see how we can configure a tax class. For instance, let’s assume that you wish to apply a specific rate for a particular region (zip code).

Initially, you would need to click on the settings, and then taxes. Now, click on the link of the tax class that you need to configure the zip code tax options.

Setting up tax rates

Click on Insert Row to add a new one. Once you do that, you see a new line appearing with all of the columns left blank. Enter the values as and how required.

Each tax rate has these attributes:

  • Country Code – The first column asks you to enter the 2 digit country code. For example, if you want the rate to apply in the USA. Enter the US in the country code.
  • State Code – The second column asks you to enter the 2 digit state code. For example, if you want the rate to apply in California. Enter CA in the country code. In case you wish the rate to apply in all states of the country, leave the box blank.
  • ZIP/Postcode – Similar to the state code, we have the zip code. To specify the particular areas, you can simply enter the postal code and separate them with a semicolon. Also, you can enter a range of codes together. For example, for all zip codes starting with 90, you can enter ’90*’.
  • City – The fourth column asks you to enter the city. For example, if you want the rate to apply in Los Angeles. Enter Los Angeles under the city column. In case you wish the rate to apply to all cities of the country, leave the box blank.
  • Rate % – Here is where you specify the tax rate for the chosen city in the given country. Remember that the field requires you to enter the rate in four decimal places. For example, if you want the tax rate to be 9%, the value to be entered is 9.0000.
  • Tax Name – Enter the name of the tax.
    Priority –It may happen that a particular checkout page has more than one tax rate applicable, accounting for a conflict. To resolve the same, you must set a priority.
  • Compound – Considering the above, if you want the mentioned rate to take over others, simply click on the checkbox here.
  • Shipping – Finally, if you want the tax rate to be applied after the addition of the shipping fee, check this box. If not, leave it as it is.
  • Once done, click on save changes to reflect them in the store.

Deleting tax rates

Now that you know how to add tax rates, let’s see how to remove them.

To delete tax rates from the WooCommerce store:

  • Move to WooCommerce dashboard, click on settings, select tax Tax, and then our Tax Rates.
  • Click on the lines and then select Remove Selected rows.
  • Click on save changes to delete them permanently.
Deleting tax rates

You can also delete all of the tax rates in a single go. Move to WooCommerce, click on status, and select tools. Click on Delete WooCommerce Tax Rates.

Delete WooCommerce Tax Rates

Viewing tax reports

The next thing we see is how to view tax reports. Move to WooCommerce > Reports > Taxes > Taxes by Date > Year. This will display the reports for the selected timeframe.

Viewing tax reports

You can also generate reports sorting them with respect to the tax code. Click on Tax by code to view the reports.

Tax code to view the reports

Who Should Pay the Customs Duty Fee? WooCommerce Store Owner or the Customers?

A lot has been said about WooCommerce taxes, the different rules, and the methods used to configure them as and when needed. While the tax rates are more or less the same when you operate nationally. However, as you expand your business and take it overseas, you need to take care or custom duty fee. Considering the fact that every country has its own duty rates and laws, it is a must to abide by the same.

Understanding Customs Duty – What is it?

To begin with, let’s run down the definition of custom duty to understand what it exactly means. Custom duty as known is the tax levied on the transfer of goods to and from a country. It is important for all traders and business operators to take note of the laws before sending their items across borders. Most of the time, an additional fee needs to be paid for sending goods and this is referred to as a customs duty fee. The addition of the same makes the product much more expensive.

Consider for example, if a product has a standard rate of $57 and a customs duty fee of $8 is imposed, the product is now worth$65. The sole purpose behind imposing the fee is to raise the price so that people are more invested in a local business.

Note that the custom fee depends on several factors including the dimensions, weight, and size of the item.

What makes Customs Duty an essential aspect for the e-Commerce businesses?

When it comes to operating an online store, store managers often are misguided in terms of the duty fee. Considering that it is an important thing and every e-commerce store owner must be aware of the taxes levied nationally and internationally, this section talks about the same.

WooCommerce stores run both in and out of the country. If a store manager isn’t aware of the right charges, he/she might end up charging their customers more or less. Either way they suffer a loss. Hence you must have a good idea of how the customs work overseas.

Every time a product is shipped from country A to country B, it is stopped midway in the customs office at B. Only after they receive a clearance, will the product reach its ideal destination.

Based on how the product was originally shipped, who is the recipient, the vendor, or via a store owner, the customs fee is levied? In case you wish to set the same, shipping plugins such as a WooCommerce FedEx Shipping Plugin allows you to manually specify who is liable to pay the customs duty fee.

WooCommerce FedEx Shipping Plugin

Above, we provided pretty much details about the custom duty fee and how it is handled, let’s see how to pay the same.

When is it required for the Store Owner to Pay?

1: In case of Low Fees

As mentioned above, the customs duty fee depends on multiple factors. So for cases when the duty fee is less, it is the store owners who take the responsibility to make the payment. This gives them an opportunity to stand out from the competitors and win over their customer’s trust.

The WooCommerce FedEx Shipping plugin has the option to set the duty payer as the sender of the product.

2: When you know the Customs Duty Fees Applicable in your serviceable countries

When the store manager has a good idea of where the product is being shipped and what would be the total fee, they prefer to settle the amount and pay from their end. Often, it so happens that the product quantity is less. If the customs fee is levied on the customers, odds are they would abandon the cart. Hence, here again, the store owners do the needful and pay the same from their pockets.

When Should Store Owners make their Customers Pay the Customs Fees?

1: When it is high and discarding is infeasible

Imagine a situation when the product is originally priced at $250 and you need to pay $150 as the customs duty fee. Even though the store owner wouldn’t want to charge their customers high, paying custom duty fees here would only incur a loss and hence, it would be better not to have the order in the first place. So for orders with heavy custom duty fee, the buyer is the payer.

Additional cases could be when goods are shipped to multiple vendors or through third-party agencies such as FedEx Shipping. In such cases, the customs duty fee is settled and the two parties agree on who would pay the duty fee. Mostly, it is the vendor or the third-party company that pays the same.

Customs Duty & Return Shipping – A Quick Overview

One problem that arises when dealing with custom duty fees is for products that are returned. By default, the customer is now the sender and if we stick to the option where the sender is expected to pay the duty fee, the customer is liable for the same.

To deal with this, what we need to do is recreate an order. Here, the shipper address is set to the customer address and the customer’s address becomes the Shipper’s address. Next, we generate a shipping label to initiate the return of the product. Considering that we cannot set or modify the option to pay the duty fee, the customer must pay the same to return the shipment.

What is Landed Cost?

Landed cost is the incurring involved in shipping physical products from one to another country. You generally need to learn about it when you start international delivery services for your customers. Overall, the landed cost consists of the item cost and shipment expenses such as the shipping fee, tax, and insurance amount, plus the customs duty fees.

While this might not seem relevant, it is important to calculate the landed cost to effectively ship products from one country to another. As a matter of fact, landed costs are important for the ones in international trade. It helps identify the total price of the product, the profit margins and the final amount to be paid by the customer. If not done, store operators might run into a loss. Irrespective of whether you are just starting or have been operating your business overseas, it’s high time that you considered landed cost as one of the important factors when calculating profits.

Conclusion

It is now easy for you to set up tax classes within your WooCommerce store. You can create and configure tax rules based on the city, region, and zip code. Make sure you adhere to custom duty fee rules and induce the same effectively, ensuring hassle-free business operations. We hope that this WPCustomify tutorial must have made doing it all even easier for you. However, you can always go ahead with professional support when things look complicated or confusing.