Tax Overview

Just like with offline commerce, governments require online merchants to collect sales tax on orders where it’s applicable. BigCommerce allows you to set up your tax configuration manually using a basic tax setup as well as connect with a third-party tax service to automate your tax configuration.

• Tax options
• Tax display settings
• Tax properties
• Default tax address

Your store’s tax settings allow you to configure tax options and tax display settings which work in conjunction with your tax services to calculate and display tax on the storefront and control panel.

Go to Settings › Tax, then scroll down and click Edit next to Tax settings to get started.

Tax Options

Tax Label

The tax label is a generic name that describes the type of tax applied to orders in your store. This will be shown next to prices that include tax (per your display settings) and when taxes on carts, orders, and invoices are shown as one summarized line item. Some suggested values include Sales Tax, GST, or just Tax.

Prices Entered with Tax

This setting applies to all prices entered in the control panel, such as products, discounts, static shipping methods, and fixed rate shipping for products.

• When No, I will enter prices exclusive of tax is selected, then all prices entered into the control panel are treated as exclusive of tax.
• When Yes, I will enter prices inclusive of tax is selected, then all prices entered into the control panel are treated as inclusive of tax.

This setting works in conjunction with other tax settings, including Default Tax Zone, Default Tax Address, Tax Display Settings, and Tax Zone Display Settings to determine how prices are calculated and displayed in relation to tax.

See Tax Services for more information on how taxes are calculated by our different tax services in relation to this setting.

When calculating the taxes on sales made outside this storefront’s default tax zone

This setting only appears and is applicable when Yes, I will enter prices inclusive of tax is selected for Prices Entered with Tax (see above).

• When Update product prices to reflect applicable tax rates is selected, the store will automatically calculate product prices using the tax rates that apply to the shopper’s location. These are determined by your configured tax zones.
• When Keep product prices as entered is selected, the calculated tax amount is still based on the shopper’s location, but the product price is unaffected. Use this option if you prefer to have consistent prices across multiple tax zones.

Fallback Tax

Fallback tax applies when your enabled automatic tax provider cannot be reached. For these instances, you have the option of:

• charging a flat 10% rate
• using your store's basic tax configuration. This may provide more accurate tax calculations than the flat 10% rate and may help save time on remedying orders with incorrect tax. Note that if basic taxes have not been set up, then the fallback tax rate will effectively be 0%.
• disabling fallback tax completely (the customer will not be able to check out). This is helpful if you prefer to not take the order rather than manually adjust orders or issue refunds for incorrect tax.

Calculate Tax Based On

This setting determines which address to use when applying a tax zone to a price when Basic Tax applies. Most stores charge tax based on the customer’s destination address. However, you can change this to the customer’s billing address, or your store's shipping origin address.

Shipping Tax Class

This is the tax class used for shipping costs when Basic Tax applies. The Shipping Tax Class comes built-in, but you can optionally create new Tax Classes and select them here if required.

Gift Wrapping Tax Class

This is the tax class used for gift wrapping costs when Basic Tax applies. The Gift Wrapping Tax Class comes built-in, but you can optionally create new Tax Classes and select them here if required.

Tax Display Settings

Here you can configure two types of tax display settings.

The first is how prices are displayed in relation to tax within the control panel and invoices. The second is whether taxes are displayed as a single line item or broken down in cart and checkout, as well as on the order and invoices.

For more information on how to configure tax display settings for prices displayed on product listing pages, product detail pages, cart, and checkout see Basic Tax Setup.

Show Prices Within Control Panel

This setting manages how pricing is displayed within the control panel. You can show line-items and subtotals including or excluding tax.

Show Prices on Invoices

This setting manages how pricing is shown on the storefront order details page and the emailed and printed order invoice. You can show line-items and subtotals including or excluding tax, or you can select to use tax zone display settings. This option allows line-items and subtotals to be displayed according to the tax zone that the customer's shipping address falls under, and requires Basic Tax Setup.

Show Tax Charges in Cart and Checkout

On the cart and checkout pages, when multiple taxes are applied to an order, you can choose whether they should appear summed on a single line, or if each rate should be broken down on its own line. Depending on where you do business, it may be required that you break down the tax display into separate rates; check with a tax professional if you’re unsure.

Show Tax Charges on Orders and Invoices

On customer order detail pages and invoices, when multiple taxes are applied to an order, you can choose whether they should appear summed on a single line, or if each rate should be broken down on its own line. Depending on where you do business, it may be required that you break down the tax display into separate rates; check with a tax professional if you’re unsure.

Tax Properties

This setting allows you to add and edit tax properties on products. Tax properties are additional pieces of data which are passed to your automatic tax provider whenever a tax quote is generated in the cart or checkout for a particular product. This allows for industry specific tax rules, configured within the automatic tax provider’s dashboard, to be applied whenever tax is calculated for shoppers.

For more information on locating tax property fields when editing products, see Automatic Tax Setup.

Display Name

The display name labels the type of tax property to be applied to selected products in your store. This text may be visible to shoppers, depending on your theme, settings, and tax jurisdiction. For example, Alcohol Percentage.

Code

This is where you will need to add the ID for this tax property. Contact your tax provider for more information on supported values and functions. For example, A-123456789.

Description

This is where you can add an optional internal tooltip for users to determine whether the tax property should be applied to a specific product or not. For example, “Applicable for all alcoholic beverages”.

Default Tax Address (optional)

This setting overrides the default tax zone that is configured within Basic Tax Setup.

When a location is configured here, the tax zone configuration that corresponds with this location will be used by default instead of the default tax zone.

The default tax zone applies to all remaining locations that are not already associated with another tax zone, therefore this setting enables you to select a tax zone that contains a custom list of locations as your default preference.

Note that when a destination address has been provided by your customer and Basic Tax is enabled, the default tax address (and the tax zone that corresponds to it) will not be used. In this scenario, the default tax zone is used.

You can set up Basic Tax in the control panel to configure and manage taxes manually, you can also set up Automatic Tax with a third-party tax service to help automate calculation and tax document submission to the tax service.

Basic Tax and automatic tax services apply to prices at different times throughout the customer experience and they differ in how they calculate prices and tax, we go into this detail below.

When Tax Services Apply

BASIC TAX

Regardless if basic tax or an automatic tax service is enabled within the control panel, basic tax will always apply to prices on product listing and product display pages. Additionally, basic tax will apply to prices on the cart and checkout before a destination address has been provided by your customer.

If basic tax is enabled within the control panel, then it will also apply to prices after a destination address has been provided by your customer.

AUTOMATIC TAX

Even when an automatic tax service is enabled within the control panel, basic tax will still apply to prices on product listing and product display pages as well as on cart and checkout before a destination address has been provided by your customer.

If an automatic tax service is enabled within the control panel, when your customer provides a destination address, then the automatic tax service will apply to prices in cart and checkout.

Note that basic tax will still apply to prices on product listing and product display pages, even after the customer has provides a destination address and the automatic tax service has been applied.

How Prices and Tax are Calculated

Basic Tax and automatic tax services calculate prices and tax differently when a destination address is provided by your customer.

BASIC TAX

When a destination address is provided by your customer, basic tax calculates prices and tax by first removing the tax amount that was applied by the Default Tax Zone or Default Tax Address. Basic Tax then applies the Tax Rates from the Tax Zone that corresponds with the destination address provided. If no tax zone corresponds with the destination address then the default tax zone is used.

Importantly, this means if you enter prices inclusive of tax, a potential outcome is that the final tax inclusive price is different to the tax inclusive price that you originally entered into the control panel.

AUTOMATIC TAX

When a destination address is provided by your customer and an automatic tax service is enabled, prices entered are kept static.

This means if you enter prices exclusive of tax, then the tax amount returned by the automatic tax service will be added to the tax exclusive price. Should you enter prices inclusive of tax, then the tax amount returned by the automatic tax service will be deducted from the tax inclusive price.

Can I make certain customers tax-exempt?

Yes. If you’re using a basic tax setup, you can use customer groups to specify which customers are exempt, then configure your tax classes to select which customer groups they should and shouldn’t apply to (by default, tax classes apply to all customers). The customer groups feature is limited to select BigCommerce plans.

If you’re using an automatic tax setup, you can use the Tax Exempt Code field to identify tax-exempt customers. See Making Customers Tax-Exempt for more information.

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

Basic Tax calculation is done at the item line level. Resulting line item amounts higher than half a cent are rounded up to the nearest cent (for example, $4.495 rounds up to $4.50). This can cause a discrepancy when comparing to tax when calculated at the subtotal level.

Certain automatic tax providers, such as Avalara AvaTax, can be configured to round tax at the item line level or the order level.

Do the UK eCommerce VAT reforms coinciding with Brexit apply to my business and if so, how?

See our blog post for more information on the businesses that may be affected and the potential changes required to address the reforms.