Understanding How to Set Up Taxes in Magento (CE 1.8/EE 1.13 & Later) (Four-Part Series)

Table of Contents

Note: This article provides information about how to set up tax calculations in Magento Community Edition (CE) and Enterprise Edition (EE). The information is based on CE 1.8 and EE 1.13 and later versions; some options here might not apply to earlier versions.

Important No guarantee is offered with respect to any of the information given here. Please contact an expert before you make any decisions about tax matters.

Overview

Magento uses customer tax classes and product tax classes, in conjunction with the tax rates of the tax jurisdictions that are relevant to your store, to determine how to apply tax rules for tax calculations.

Tax rules are a combination of customer tax class, product tax class, and tax rates. Each customer is assigned to a customer group, which in turn is associated with a specific tax class. Products are also assigned to a tax class.

Magento determines the tax by analyzing the tax class of the products in the shopping cart, the tax class of the customer, and the region where the transaction takes place. The region can be determined by the customer’s shipping address, the billing address, or the shipping origin.

So for Magento to correctly calculate taxes on orders, you need to set up customer tax classes, product tax classes, tax rates, and tax rules. These steps are covered in the topics listed below.

Set Store Scope

When you set up tax options, be sure to set your store scope so that the options are applied across stores and websites appropriately.

Restrict Access to Tax Settings by Setting Up Roles and Users

You can restrict access to tax settings in the Admin panel by setting permissions for users. You set permissions by creating roles. For more information, see Setting Up Admin Users and Roles in Magento CE 1.8 and EE 1.13.

Note that when you are allowing your store's users to access tax functionality, you need to make sure that the Sales/Tax areas are included, along with the System/Tax areas. If you are setting up another website and you want to load catalog prices including tax for a different region than your default shipping origin, you’ll also need to allow access to the System/Shipping settings for that role, because shipping origin determines what the assumed store tax rate is for catalog prices.

Steps in the Tax Setup Process

For More Information

For more information about tax updates for the Magento CE 1.8 and EE 1.13 release, see Magento CE 1.8 and EE 1.13: Recommended Tax Configurations and Best Practices.

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