What We'll Cover
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 as well as connect with a third-party tax service to automate your tax configuration.
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.
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 for example, 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 difference tax services in relation to this setting.
The Prices Entered With Tax setting affects all prices. You cannot enter prices inclusive of tax for some prices and exclusive for others.
Fallback tax only applies when your enabled automatic tax provider cannot be reached. For these instances, you have the option of charging a flat 10% rate or using your manual tax configuration. Note that if manual taxes have not been set up, then the fallback tax rate will effectively be 0%.
Calculate Tax Based On
This setting determines which address to use when applying a tax zone to a price when Manual 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 Manual 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 Manual 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 Manual 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 Manual 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.
Default Tax Address (optional)
This setting overrides the default tax zone that is configured within Manual 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 Manual 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 Manual Tax in the control panel to configure and manage taxes manually, additionally, 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.
Manual 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
Regardless if manual tax or an automatic tax service is enabled within the control panel, manual tax will always apply to prices on product listing and product display pages. Additionally, manual tax will apply to prices on the cart and checkout before a destination address has been provided by your customer.
If manual tax is enabled within the control panel, then it will also apply to prices after a destination address has been provided by your customer.
Even when an automatic tax service is enabled within the control panel, manual 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 manual 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
Manual tax and automatic tax services calculate prices and tax differently when a destination address is provided by your customer.
When a destination address is provided by your customer, manual tax calculates prices and tax by first removing the tax amount that was applied by the Default Tax Zone or Default Tax Address. Manual 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.
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 manual 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?
Manual 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.