Recommended Tax Configuration for Canadian Stores (Magento CE 1.8 and 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 take any decisions about tax matters.

Overview

In Magento, to get two different tax amounts to be displayed as separate line items, such as GST and PST for Canadian stores, you must set different priorities for the related tax rules. However, in previous tax calculations, taxes with different priorities would automatically be compounded. To correctly display separate tax amounts without an incorrect compounding of the tax amounts, you now set different priorities, but also check the checkbox for Calculate off subtotal only. This results in correctly calculated tax amounts that are shown as separate line items in tax displays.

Note: If you have stores that operate in many states or countries, or if you have revenues exceeding approximately $2M per year, we recommend that you use a third-party tax provider because there can be a considerable number of tax rules and tax zones to manage.

This article assumes that you are familiar with general tax settings in Magento. For detailed instructions on how to set up general tax calculations, see Understanding How to Set Up Taxes in Magento CE 1.8 and EE 1.13 (Four-Part Series).

These steps walk you through an example for creating Canada GST and Saskatchewan PST tax rates, and setting up tax rules to calculate and display the two tax rates correctly. This is an example setup; be sure to verify correct tax rates and rules for all of your tax jurisdictions. (Note that in Quebec PST is referred to as TVQ, so if you set up a rate for Quebec, substitute TVQ as the identifier.)

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.

Step 1: Set General Tax Settings in System > Configuration> Sales > Tax

Set general tax settings as shown in the following table.

Tax Settings Recommended Options
Tax Class for Shipping Shipping (shipping is taxed)
Tax Calculation Based On Shipping Address
Tax Calculation Method Based On Total
Catalog Prices Excluding Tax
Shipping Prices Excluding Tax
Apply Customer Tax After Discount
Apply Discount on Prices Excluding Tax
Apply Tax On Custom price if available
Default Country Canada
Default State Set as appropriate
Default Postal Code * (asterisk)
All price display settings Excluding Tax
Include Tax in Grand Total Yes
Display Full Tax Summary Yes
Display Zero Tax Subtotal Yes
Enable FPT Yes
All FPT Display Settings Including FPT and FPT description
Apply Discounts to FPT No
Apply Tax to FPT Yes
Include FPT in Subtotal No

Note: FPT is included for relevant goods as a product attribute. For more information, see Setting Up a Fixed Product Tax (FPT) in Magento CE 1.8 and EE 1.13.

Step 2: Set Up a Tax Rate for Canada-GST 5% in Sales >Tax > Manage Tax Zones & Rates

Add a new tax rate with the options shown in the following table and figure.

Tax Settings Recommended Options
Tax Identifier Canada-GST
Country Canada
State * (asterisk)
Zip/Post is Range No
Zip/Post Code * (asterisk)
Rate Percent 5.0000

Step 3: Set Up Another Tax Rate for Canada-SK-PST 5% in Sales >Tax > Manage Tax Zones & Rates

Add another new tax rate with the options shown in the following table and figure.

Tax Settings Recommended Options
Tax Identifier Canada-SK-PST
Country Canada
State Saskatchewan
Zip/Post is Range No
Zip/Post Code * (asterisk)
Rate Percent 5.0000

Step 4: Set Up a Tax Rule for Canada GST in Sales >Tax > Manage Tax Rules

For this tax rule be sure to set the priority to 0 and check the checkbox for "Calculate off subtotal only," so that the taxes will be shown as separate line items but the tax amounts will not be compounded.

Add a new tax rule with the options set as shown in the following table and figure.

Tax Settings Recommended Options
Name Retail-Canada-GST
Customer Tax Class Retail Customer
Product Tax Class
  • Taxable Goods
  • Shipping
Tax Rate Canada-GST
Priority 0
Calculate off subtotal only Check this checkbox
Sort Order 0

Step 5: Set Up Another Tax Rule for Saskatchewan PST in Sales >Tax > Manage Tax Rules

For this tax rule be sure to set the priority to 1 and check the checkbox for "Calculate off subtotal only," so that the taxes will be shown as separate line items but the tax amounts will not be compounded. (When the priority is different for two tax rules, they are shown as separate line items. If you do not check the "Calculate off subtotal only" checkbox, the two taxes will be calculated to display an incorrect compounded amount.)

Add a new tax rule with the options set as shown in the following table and figure.

Tax Settings Recommended Options
Name Retail-Canada-PST
Customer Tax Class Retail Customer
Product Tax Class
  • Taxable Goods
  • Shipping
Tax Rate Canada-SK-PST
Priority 1
Calculate off subtotal only Check this checkbox
Sort Order 0

Create a sample order in your store to see a result like the one shown in the following figure.

Tip: To get the GST number printed on invoices, etc., add it to the name of the appropriate tax rates. This way the GST number is displayed as part of the GST amount on any order summary.

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