Magento Tax Setup, Step 2: Configure General Sales Tax Options (CE 1.8/EE 1.13)

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; 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

In this Sales Tax area, you apply general settings for tax classes, tax calculations, and display for orders in your store.

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

From the Admin panel, Select System > Configuration > Sales > Tax. Then click to expand each of the following sections and set the options according to your local tax rules, as described in the sections that follow.

Tax Classes for Shipping and Gift Options

  1. Click to expand the Tax Classes section.
  2. In the Tax Class for Shipping field, designate a product tax class for the shipping amount, or select "None" if your store does not charge an additional tax on shipping expenses.
  3. In the Tax Class for Gift Options field, designate a product tax class for gift options, or select "None" of your store does not charge an additional tax on gift options.

Calculation Settings

  1. Click to expand the Calculation Settings section.
  2. Set Tax Calculation Method Based On to one of the areas of the invoice, as shown in the following table, according to your local requirements.
    Option Description
    Unit Price Using this rounding rule Magento calculates the tax for each item and displays prices tax-inclusive. To calculate the tax total, Magento rounds each of the item taxes individually and then adds them together.
    Row Total Using this rounding rule Magento calculates the tax for each line. To calculate the tax total, Magento rounds each of the line item taxes and then adds them together.
    Total Using this rounding rule Magento calculates the tax for each item and adds those tax values to calculate the total unrounded tax amount for the order. Magento then rounds that value to determine the total tax for the order.
  3. Set Tax Calculation Based On to one of the areas of the invoice, as shown in the following table, according to your local requirements. This setting will show your store's tax. Store tax is tax that's calculated based on your store's address, for display purposes. Actual tax for an order is calculated by Magento when the customer enters their information and the system updates the tax based on the appropriate tax rates and rules that apply to that order.
    Option Description
    Shipping Address Use this option if your store bases tax calculation on the address to which the item is shipped.
    Billing Address Use this option if your store bases tax calculation on the billing address for the item.
    Shipping Origin Use if your store bases tax calculation on the shipping origin address.
  4. Set Catalog Prices to one of the options shown in the following table, according to your local requirements.
    Option Description
    Excluding Tax Catalog prices do not include tax.
    Including Tax Catalog prices include tax.
  5. Set Shipping Prices to one of the options shown in the following table, according to your local requirements.
    Option Description
    Excluding Tax Shipping prices (or those obtained from gateways) do not include tax.
    Including Tax Shipping prices (or obtained from gateways) include tax.
  6. Set Apply Customer Tax to one of the options shown in the following table, according to your local requirements.
    Option Description
    Before Discount

    Customer tax is applied before the discount is calculated.

    Note: Magento advises you to not choose this option because it can lead to errors in calculating the total price.

    After Discount Customer tax is applied after the discount is calculated.
  7. Set Apply Discount on Prices to one of the options shown in the following table, according to your local requirements. Note: If "Apply Customer Tax After Discount" is selected, the applied discount on price, including tax, is calculated based on store tax. Store tax is calculated based on the store's address for display purposes. The actual tax that a customer pays on an order is calculated when the customer enters a shipping address and the system updates tax based upon your store's tax configuration settings.
    Option Description
    Excluding Tax Any discount on prices is applied excluding tax.
    Including Tax Any discount on prices is applied including tax.
  8. Set Apply Tax On to one of the options shown in the following table, according to your local requirements.
    Option Description
    Custom price if available Tax is applied to any custom prices available.
    Original price only Tax is applied to the original price only.

Default Tax Destination Calculation

  1. Click to expand the Default Tax Destination Calculation section.
  2. Set Default Country to the country where the tax applies. Depending on which default country you select, the subsequent options might change depending on the requirements for that country.
  3. Set Default State to the state where the tax applies. By default, this option is not set, as indicated by the asterisk (*).
  4. Set Default Post Code to the Zip code or postal code where the tax applies. By default, this option is not set, as indicated by the asterisk (*).

Price Display Settings

  1. Click to expand the Price Display Settings section.
  2. Set Display Product Prices in Catalog to one of the options shown in the following table, according to your local requirements.
    Option Description
    Excluding Tax Product prices are displayed without tax included.
    Including Tax Product prices are displayed with tax included.
    Including and Excluding Tax Product prices are displayed both including and excluding tax.
  3. Set Display Shipping Prices to one of the options shown in the following table, according to your local requirements.
    Option Description
    Excluding Tax Shipping prices are displayed without tax included.
    Including Tax Shipping prices are displayed with tax included.
    Including and Excluding Tax Shipping prices are displayed both including and excluding tax.

Display Settings for Shopping Cart, Orders, Invoices, and Credit Memos


  1. Set Display Prices, Display Subtotal, Display Shipping Amount, Display Gift Wrapping Prices, and Display Printed Card Prices to one of the options shown in the following table, according to your local requirements.
    Option Description
    Excluding Tax Items are displayed without tax included.
    Including Tax Items are displayed with tax included.
    Including and Excluding Tax Items are displayed both including and excluding tax.
  2. Set Include Tax in Grand Total to one of the options shown in the following table, according to your local requirements.
    Option Description
    Yes Calculates grand total to include tax.
    No Calculates grand total without tax.
  3. Set Display Full Tax Summary to one of the options shown in the following table, according to your local requirements.
    Option Description
    Yes Displays tax summary on orders, invoices, and credit memos.
    No Does not display tax summary on orders, invoices, and credit memos.
  4. Set Display Zero Tax Subtotal to one of the options shown in the following table, according to your local requirements.
    Option Description
    Yes Displays subtotal for orders with zero tax.
    No Does not display subtotal for orders with zero tax.

Fixed Product Taxes

For detailed instructions, see Setting Up a Fixed Product Tax (FPT) in Magento CE 1.8 and EE 1.13.

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