What are Tax Classes? (product and customer)
Tax classes are used to define Tax Rules. Tax Rules are defined as a combination of a Tax Rate with a Product Class and Customer Class. We edit both by going to Sales -> Tax and selecting the rule you want to modify. Let’s start with Customer Tax Classes.
To set up Tax Classes you are simply entering the name. In this case we will have two Customer Tax Classes; Retail Customer and Wholesale Customer.
Just select Add New Class, enter the name of the class, and select Save Class. This is all we define at this stage.
Product Tax Classes are created the same way. Select Product Tax Classes and then add the new Product Class.
We now have 2 Customer Tax Classes and 3 Product Tax Classes. Each customer will be assigned a Tax Class (via their Customer Group) and each product will be assigned a Product Tax Class.
To complete the tax calculation you will need to define the rules that govern the combination of the Classes with the Rates and you do this in the Tax Rules section.