Taxes are a complex subject, which should be fully understood as it can have a significant impact on your product prices or your shipping fees. While this user guide is not meant to teach all the ins-and-outs of taxes, we will try our best to give you pointers.
Taxes are compulsory contribution to state revenue, levied by the government on workers' income and business profits or added to the cost of some goods, services, and transactions. In short, every product you sell is subject to sales taxes, which depend on your state's tax laws. In effect, you contribute to your state or government functioning (public goods and services) with a percentage of all your sales, as defined by local tax rates.
There are hosts of tax rates in the world, and they vary considerably from one country to another, and even within a single country if it has federal states (USA, Germany, Spain, Russia, etc.). You should therefore make sure to strictly conform to your country's tax laws, and even those of your state or town if they apply to you. Check with your local tax representative as soon as possible in order to get all the official details.
By default in PrestaShop, a tax applies to all countries/states/zones. If order to apply a specific tax rate for a single country or a set of countries (and not some others), you must create a tax rule. The tax rule is then applied on a per-product basis, during the creation of the product ("Prices" tab).
You cannot directly apply a tax to a product; you can only apply tax rules. Therefore, you must first register all relevant taxes, and then create a tax rule for that tax in order to specify the countries to which the tax applies, and finally apply the tax rule to the product.
Adding a new tax
When you install PrestaShop, you set a default language, which implies that a certain number of taxes are already in place.
To add a new tax, click on the "International" tab, then "Taxes". This will display a list of taxes that have already been created.
To add a new tax, click on the "Add New" button in the top right. A configuration window opens.
There are three fields that need completing:
Name. This is the name of the tax rule. For clarity, it is a good idea to put the name of the country and the percentage to be applied.
Rate. This is the percentage to be applied to the pre-tax prices of the products. You must enter the value in format XX.XX or XX.XXX (e.g. 20.00 or 20.145).
Enabled. The tax can be enabled or disabled.
Creating a tax rule
Tax rules make it so that taxes are only applied to select countries.
By default in PrestaShop, a tax applies to all countries/states/zones. In order to apply a specific tax rate for a single country or a set of countries (and not some others), you must create a tax rule. The tax rule is then applied on a per-product basis, during the creation of the product ("Pricing" tab).
You cannot directly apply a tax to a product; you can only apply tax rules. Therefore, you must first register all relevant taxes, then create a tax rule for that tax in order to specify the countries to which the tax applies, and finally apply the tax rule to the product.
A few sample taxes are already in place, which depend on the country you chose for your shop during the installation of PrestaShop. The tax rules are set for each tax: the rules actually serve as a kind of country filter, limiting the use of that tax to a specific set of countries.
Once all of the taxes have been created, go to the "Tax Rules" tab to find all of the tax rules that have been created, as shown below.
To add a new tax rule, just click on the "Add New" button.
In the form that appears, name the rule. Use a telling name: use the tax rule's country code, its name, maybe even its rate, so you can find it again easily. If PrestaShop already has tax rules for the target country, use their name as inspiration for consistency purposes.
Enter the name of the tax rule, enable it, then click on "Save and stay".
Saving will open a new block that allows you to define the attributes of this tax rule.
Fill in all of the form fields:
Country. The target country for the rule you are creating.
State/region. Some countries have federal states registered in PrestaShop (see the "States" page, under the "Localization" menu). In that case, you can make the tax even more specific, or choose to have it applied to the whole country. You can select more than one state by pressing the Ctrl key when clicking on state names.
Zip/postal code range. Whether the country has registered states or not, you can further specify the tax application using the customer's zip code. This field enables you to define zip codes in which the tax should be applied: either enter a single zip code, or define a range using the dash. For instance, use "75000-75012" to create a range for all zip codes between these two.
Behavior. Some customers might have an address that matches more than one of your tax rules. In that case, you can choose how this tax rule should behave:
- This Tax Only. Will apply only this tax, not any of the other taxes corresponding to the customer.
- Combine taxes. For instance: $100 + (10% + 5% => 15%) => $115.
- One After Another. Apply taxes one after another. For instance: $100 + 10% => $110 + 5% => $115.5.
Tax. The tax to be used for this tax rule. This tax must already be registered in PrestaShop. If not, choose "No tax", disable the tax rule, create a tax in the "Taxes" page, then come back to edit the tax rule.
Description. You may add a short text as a reminder of why this tax rule exists for this country.
Once all of these parameters have been defined, save them.
Please note that the default rate applied to your products will be based on the default rate for your country.