Basic Tax Setup

Part of running a business is calculating and collecting sales tax. Tax collection requirements will differ depending on your local, state, and federal laws, so we recommend using an automatic tax setup if you are in a supported area.

However, if your location falls outside of our automatic tax providers’ regional coverage, BigCommerce allows you to configure your store’s tax collection using the basic tax setup. To do this, you will need to define the tax rates for the different regional zones that you are required to collect in. The sales tax will be applied at checkout after the customer has supplied their address.

Below, we’ve provided detailed instructions on setting up tax zones (where you charge) and tax rates (how much you charge). Be sure to use this in conjunction with your store’s tax settings.

Before you start setting up basic taxes, you will need to determine the following:

• What do you need to charge tax on? It can be different product types, shipping, or services like gift wrapping. This will determine your tax classes.
• Where do you need to charge taxes? It can be countries, states, cities, and even counties. This will determine your tax zones.
• Who do you need to charge for taxes? Do you anticipate any tax-exempt customers? This will determine if you need to create a tax-exempt customer group.
• What rates do you need to charge? This determines the tax rates, which are assigned by zone and tax class.
• How do you want prices to be displayed with taxes? This is usually based on your customer’s location and their local preferences, such as displaying prices exclusive of tax for US customers and inclusive of tax for Australian customers.

Example Case

Here is an example of a hypothetical store’s tax settings. They need to:

• Charge only on orders placed with a Colorado billing address
• Use tax-exclusive pricing (pricing is shown without tax added in)
• Set up tax rates on two different product types:
  • 5% on perishable goods
  • 8% on non-perishable goods
• Set up a 0% tax rate for tax-exempt customers

They would need to use the following setup to address each of these aspects:

• Charge only on orders placed with a Colorado billing address — set up a Colorado tax zone
• Use tax-exclusive pricing — select “Display prices exclusive of tax” on the Colorado zone's tax display settings
• Different tax rates between perishable and non-perishable goods — set up a “perishable goods” tax class and a “non-perishable goods” tax class, then set the tax rate for both classes in the Colorado zone.
• Set up 0% rate for tax-exempt customers — set up a tax-exempt customer group with all rates set to 0%

In order to manage basic tax setup, your user account must have the following permissions enabled:

• Manage Customers
• Manage Channels
• Customer Groups
• Manage Tax Settings

Once you have an idea of the tax requirements you need, you can begin setting up tax. Go to Settings › Tax, and click Edit next to Basic Tax.

We recommend beginning your tax setup in the following order. Keep in mind that you can always test your orders and tweak your settings if needed.

1. Create all tax classes you need for your different product types. Once created, they will show up in other parts of the tax configurations.

2. Create and configure your tax zones, then specify the tax rates for each zone.

3. We recommend doing a test order for each tax scenario you need to address to make sure everything is working as intended.

Tax classes are classifications for products and other line items that may need different tax rates charged. For example, your state may require you to tax perishable goods and non-perishable goods at different rates, or you may be required to tax shipping or gift wrapping.

This is achieved by creating different tax classes for each group. Any tax classes you create are added to all of your zones, where you can assign them the appropriate rate. Any unused classes in a zone can be set to a rate of 0%.

To view, add, or edit tax classes, click Edit next to Basic Tax.

We've included some tax classes automatically. By default, BigCommerce assigns all products to a single class, the default tax class.

If you are selling products that require different tax rates, such as perishable and non-perishable goods, you can create those tax classes here.

To create a new tax class, click the + button. You can also delete tax classes by clicking the - button, but recommend keeping all tax classes and just assigning them a rate of 0% if you aren’t using them.

Assigning Tax Classes to Products

Once the tax classes are created, you will need to update your products to indicate which tax class they belong to. For example, you would update your perishable products to the “Perishable Goods” tax class.

Assign your products to the appropriate tax class by editing the product and selecting the new tax class from the drop-down.

If you have several products, we recommend updating them in bulk by editing the Tax Class column in the Bulk Edit CSV template.

Shipping and Gift Wrapping Tax Classes

By default, you will have a Shipping and a Gift Wrapping tax class. These are for merchants who are required to collect taxes on shipping or gift wrapping. Even if you are not collecting tax for these, do not delete them.

If you are not required to collect taxes on these, set the tax rate to 0% in all of your zones.

If you are required to collect taxes for either of them, you will set the rate as needed within the appropriate zone, just as you would a product tax class.

When editing your Tax Settings, there are fields for Shipping tax class, Handling tax class, and Gift Wrapping tax class. These should be set to their corresponding tax class. If they are set to something else, your shipping, handling, and gift wrapping taxes will be charged at the rate specified for that other class.

Once you have set up your tax classes, they will appear in the tax zones you create in the next step.

• Default tax zone
• Adding zones
• Tax zone display settings
• Editing and copying zones
• Deleting zones

The regulations for taxes vary based on your geographic location.

To charge different rates for different geographic locations, you will create one or more tax zones. A tax zone specifies the geographical area where a group of tax rates apply. You can set which address (billing, shipping, or your business' address) this zone should apply to in your tax settings.

To view your tax zones, go to Settings › Tax and click Edit next to Basic Tax. Click to select the Tax Rates & Zones tab.

You will see any current tax zones and an overview of their settings:

• Zone Type — how the zone is defined. Zones can be based on country, state, zip/post code.
• Price Display — whether the zone’s price display setting is tax inclusive or tax exclusive
• Status — whether the zone is currently active on the store or not

Default Tax Zone

All stores contain a Default Tax Zone, which applies taxes to any regions not set up in another zone. Do not set up tax rates in this zone. Unless you have nexus everywhere in the world, you will want to keep this as an “everywhere I don’t need to charge taxes in” zone.

Adding Zones

To add a new tax zone, click Add a Tax Zone.

Enter a Tax Zone Name and complete the other fields listed below. The tax zone name is an internal name that you can use to keep track of your zones.

• Tax Zone Name — set the name of this tax zone. We recommend naming it after the geographic region it represents, such as Los Angeles, Denton County, California, or the USA.
• Tax Zone Type — select whether the zone represents a country, state, or collection of zip/postcodes. Zip/postcodes can be used together in a zone for city or county taxes.
• Tax Zone Applies to — if you want to limit this tax zone to certain customer groups, select Only customers in these groups, and then select the group(s) to assign it. Otherwise, keep this setting as All customers in my store.
• Enable this tax zone — toggle this checkbox to enable or disable the tax zone

Tax Zone Display Settings

While editing a tax zone, you can configure how the pricing will display on your storefront.

If you have geolocation enabled or a shopper enters their address, the prices displayed in product listing, product detail, cart, and checkout pages will use the tax display settings of the relevant tax zone.

Note that you must set up all of the required tax zones for geolocation to correctly display prices to shoppers on your storefront. See Tax Overview for more information and recommendations.

• How are prices displayed on your storefront — select to display prices as either inclusive or exclusive of tax
• Show prices both including and excluding tax — select to display both inclusive and exclusive pricing on product listing pages (such as category and brand pages) and product detail pages (product pages). While this setting is optional, it can be valuable for pricing transparency to shoppers.

Once you’ve finished with modifying the settings, click Save to add or update the tax zone.

Editing and Copying Zones

To edit a tax zone, click on the Action icon next to the zone, then select Edit Settings. You can make a copy of a tax zone and its rates by selecting Copy. This can be useful when you are setting up multiple tax zones that will be similar to each other.

Deleting Zones

To delete tax zones, check the box next to its name, then click the Trash icon in the top navigation. Click OK to confirm, and the zones will be removed.

You can also select Delete from the Action menu. Note that the Default Zone — used for any location outside of your tax zones — cannot be deleted from stores.

Once a tax zone is created, you can add rates to it. Tax rates are the percentages at which products or services are taxed. You may charge multiple tax rates within a zone. For example, if you have a city zone, you may need to set up a set of city-based tax rates in addition to a set of state-based tax rates.

After you have created a tax zone, click the Tax Rates tab to add, delete, or edit tax rates. You can also select Edit Rates next to a particular zone when viewing the list of tax zones.

When adding or editing a rate, you will need to specify a name and enter a rate for each tax class. If you do not need to charge tax for a particular tax class, enter 0 for the rate. Name the tax rate something that represents which tax you are charging, like City Tax or Federal Tax.

Tax Calculation Priority

In some circumstances, you will need to apply multiple rates to a single tax zone. For example, you may need to charge both city and state, or both provincial and federal sales taxes. If you have a tax zone that has more than one rate, you need to set the Calculation Priority.

Tax rates in a zone that share the same priority will be added together. Tax rates in a zone that have different priorities will be compounded in order of the priority, where the lowest number has the highest priority. So for example, if you had to charge a GST rate on top of a PST rate, you would give PST a priority of 0 and GST a priority of 1.

Tax rates can be deleted using the same methods for deleting tax zones — by selecting the rate, then clicking the Trash icon in the top navigation, or by selecting Delete from the action menu.

• State/Province with a single tax rate
• Country with a single inclusive tax rate
• State/Province with multiple tax rates
• Zone based on zip/postal codes
• Using wildcards

Below we've included a few examples of how to set up zones, classes, and rates for everyday situations.

State/Province with a Single Tax Rate

First, we'll create a zone based on a state with a single tax rate. In our example, we're using Texas.

1. In the basic tax settings area, click on the Tax Rates & Zones tab, then click Add a Tax Zone.

2. Name the zone "Texas", then select This tax zone is based on one or more states.

3. Select United States in the Country box, then select Texas in the States box. Select Display prices exclusive of tax, as this is the normal expectation for US customers. Adjust any other settings to your preference, then click Save.

4. Once you’ve saved the new tax zone, click Add a Tax Rate on the Tax Rates tab.

5. Name the tax rate, then type in the percentages for the appropriate tax classes. In this case, we only want to charge tax on products (not gift wrapping or shipping), so we will enter "8.25" into the field for Default Tax Class and "0" for the other tax class rates.

6. Save your changes. Your Texas zone is set up successfully.

Country With a Single Inclusive Tax Rate

For this example, we will create a zone based on a country with a single tax rate that displays pricing on the storefront with all applicable taxes included. With tax zones of this type, you will often see tax settings such as a default tax address used to offer a comprehensive shopper experience from the storefront homepage to order status emails. In the example below, we’re using the United Kingdom as our country.

1. In the basic tax settings area, click on the Tax Rates & Zones tab, then click Add a Tax Zone.

2. Name the zone "United Kingdom", then select This tax zone is based on one or more countries.

3. Select United Kingdom in the Country box, then select Display prices inclusive of tax. Adjust any other settings to your preference, then click Save.

4. Once you’ve saved the new tax zone, click Add a Tax Rate on the Tax Rates tab.

5. Name the tax rate, then enter in the appropriate percentages for your tax classes. To only charge tax on products (not gift wrapping or shipping), we will enter “20” for the Default Tax Class and “0” for the other tax class rates.

6. Save your changes. At checkout, taxes will now display as included in product prices for UK customers.

State/Province with Multiple Tax Rates

In our next example, we'll create a zone based on a province with multiple tax rates. In this example, we're using Quebec, which has both a federal and provincial tax.

1. In the basic tax settings area, click on the Tax Rates & Zones tab, then click Add a Tax Zone.

2. Name the zone "Quebec", then select This tax zone is based on one or more states.

3. Select “Canada” as the Country, then “Quebec” under States. Select Display prices exclusive of tax, as this is the normal expectation for Canadian customers. Adjust any other settings to your preference, then click Save.

4. Save the new tax zone, then click Add a Tax Rate on the Tax Rates tab.

5. Give the tax an appropriate name. For this example, we will name the federal tax rate "GST" (Goods and Services Tax). To only tax products, enter "5" for Default Tax Class and "0" for the other tax class rates.

6. Leave the Calculation Priority set at "0", as we want this rate calculated first. Save your changes.

7. Click Add a Tax Rate to add a second tax rate for provincial taxes.

8. For this example, name the provincial tax rate "QST" (Quebec Sales Tax). Enter "9.975" for Default Tax Class and "0" for the other tax class rates.

9. Set the Calculation Priority to "1", so that it is calculated after the federal tax (GST) rate. Save your changes.

Zone Based on Zip/Postal Codes

Finally, we'll create a zone with a single tax rate, based on zip codes. In this example, we're using Florida, which has different tax rates based on your location within the state. Even though we are only creating a single 7.75% zone in this example, in practice, you'll want to create a zone for each different rate.

1. In the basic tax settings area, click on the Tax Rates & Zones tab, then click Add a Tax Zone.

2. Name the zone. In this example, it is named "Florida 7.75%". Select This tax zone is based on one or more postal or ZIP codes for the Tax Zone Type.

3. Select United States from the Country drop-down, then type in the zip codes that apply to your specified tax rate into the ZIP/Postal Codes box. Type each zip code on a new line, as illustrated below:

4. Select Display prices exclusive of tax, as this is the normal expectation for US customers. Adjust any other settings to your preference, then click Save.

5. Once you’ve saved the new tax zone, click Add a Tax Rate on the Tax Rates tab.

6. Give the tax an appropriate name. In our example, we're naming it “Florida 7.75% Zip Codes”. Enter the percentages for each of the tax class rates. For this example, enter "7.75" for Default Tax Class, and "0" for the other tax class rates.

7. Once finished, click Save.

Using Wildcards

The Zip/Postal Codes field supports the use of the wildcards * and ?.

Using an asterisk (*) will capture all numbers from its position in the zip code all the way to the right. For example, entering 335* will capture all zip codes ranging from 33500 through 33599.

Using a question mark (?) will capture numbers 0-9 only in the position that the question mark is placed. For example, entering 335?1 will capture 33501 through 33591.

To capture all variations of a specific zip code, enter the base code on one line, then the base code with an asterisk on the next line, like so:

• 53927
• 53927*
• 53934
• 53934*
• 53910
• 53910*

How many tax zones can I create?

There is no limit to the number of tax zones you can create on your store.

How many zip codes can I add to a tax zone?

The ZIP/Postal Codes field is limited to 200 characters. If you need to add more, we recommend creating additional tax zones.

Do I have to create zones for everywhere I don’t charge tax?

No. There is a zone called “Default Zone — Everywhere else”. Do not create tax rates for this zone. This ensures by default that anywhere you haven’t set up a zone for will not be charged taxes.

Why can't I see certain customer groups while specifying which groups a tax zone applies to?

When assigning customer groups to a tax zone, only the first 1,000 customer groups are displayed in the list. If you have more than 1,000 customer groups, you can use the Tax API to assign groups that do not appear in the list.

How do I collect a combination of local, state, and federal tax rates?

You may need to charge additional rates for a local jurisdiction in addition to a county, state, provincial or federal tax. However, an order will only be charged the rates of the zone it most closely corresponds to. In other words, if a customer’s zip code matches your city zone, it will take the city zone rates but not your state zone rates, even if the city is within that state.

To charge a combination of city and state rates, you will need to set up all applicable rates within each zone. So if customers within a certain city need to be charged both city and state rates, you will add both.

For example, if you are based in Dallas, Texas and had to charge both city and state taxes, you would create the following zones and rates:

• Texas (zone)
  • State tax (rate)
• Dallas (zone)
  • State tax (rate)
  • City tax (rate)

This way, a customer based in Texas outside of Dallas will be charged the Texas zone rates: a state tax. A customer based inside of Dallas will be charged the Dallas zone rules: the state and city tax rates.

Can I restore my basic tax setup to its original values?

Yes, this can be done from the General tab in the basic tax settings area. Click the Reset Configuration button to restore tax classes, rates, and zones to their default values.

My sales tax amount is off by a cent. Is something wrong?

Basic Tax calculation is done at the item line level, and taxes are rounded up to the nearest unit, such as cents. This can cause a discrepancy when comparing to tax calculated at the subtotal level. See the example below.

	Amount		Tax Amount Before Rounding	Tax Amount After Rounding	Line Item + Tax Amount
Line Item 1	$6.67	15%	$1.0005	$1.00	$7.67
Line Item 2	$1.99	15%	$0.2985	$0.30	$2.29
Totals	$8.66		$1.2990	$1.30	$9.96

In this example, the total tax amount applied to the order would be $1.30.