Sales Tax

The CRE Loaded tax system allows for great flexibility, but it is a bit complex to understand -- in large part because taxes themselves are so complicated. For example, every state in the U.S. has a different sales tax rate, but there is no national sales tax; the UK has three different levels of national value-added tax; and Canada has three kinds if sales taxes -- provincial, national, and combined. Because CRE Loaded is designed to be used anywhere in the world, it has to be able to deal with all of these variations (and many more).

Setting up taxes involves configuring three separate pieces of information: tax class, tax zone, and tax rate.

Tax Class determine if a product is taxable and, if so, what taxes to apply.

Tax Zones determine what taxes to charge based on a customer's location.

Tax Rate is the specific amount of tax that is charged.

1.1 Tax Class

Tax Class is the first thing to define. This is what is applied to each individual product. In the U.S., you will probably only need to create a "Taxable Goods" tax class. In the UK, you would need "VAT" and "reduced VAT." Any products that are not subject to sales tax can be assigned "None"; you do not necessarily need to create a "Non-taxable" class, although you certainly can if you so desire.

To create a tax class, go to Admin => Configuration => Locations/Taxes => Tax Classes. Select "New Tax Class" and enter a name for the class and a description, then click "Insert" again. "Taxable Goods" is already defined, so if this is the only tax class you need, you can leave it as it is or edit it to change the name or definition.

1.2 Tax Zones

Whether or not taxes are charged usually depends on both where the products are shipped from and where they are shipped to.

In the U.S., products shipped within one state are charged that state's sales tax, but products shipped between states generally do not pay tax. If you ship products from Miami, Florida, the Florida state sales tax would be charged on an order shipped to Orlando, Florida, but not on an order shipped to Atlanta, Georgia.

In Canada, the Goods and Services Tax (GST) is charged on all taxable products shipped within the country. Separate Provincial Sales Tax (PST) is also charged on products shipped within most provinces. If you ship products from Toronto, Ontario to Thunder Bay, Ontario, the PST and the GST are both levied, but only the GST would be charged on products shipped to Vancouver, British Columbia.

Because of the possibility of multiple levels of tax (as in the case with Canada), each tax zone is actually a group, and therefore may contain one or more other tax zones.

To create a tax zone, go to Admin => Configuration => Locations/Taxes => Tax Zones. Select "Insert" and enter a name for the zone and a description, then click "Insert" again. This will return you to the main Tax Zones screen. Now click on the folder for the tax zone you just created and click "Insert." Select the Country from the drop-down menu, then select the specific Zone from the drop-down menu.

For example, to create a state sales tax zone for California, select "Insert" and enter "California" for the zone name and "CA sales tax" for the description. Click "Insert," then select the folder for "California," click "Insert," select "United States" from the Country list and then "California" from the Zone list. Customers with shipping addresses in California will automatically be charged the California Tax Rate.

To create multiple levels of tax (such as the Canadian GST and PST), you should first create the lower-level tax zone -- the provincial tax, for instance -- as explained in the preceding paragraph. You then create the higher-level tax zone -- the national tax -- and add the lower level zones to it.

For example, if your store were located in Toronto, Ontario, Canada, you would first create a tax zone for Ontario PST: go to Admin => Configuration => Locations/Taxes => Tax Zones, select "Insert" and enter "Ontario" for the zone name and "Ontario PST" for the description. Click "Insert," then select the folder for "Ontario," click "Insert," select "Canada" from the Country list and then "Ontario" from the Zone list. Now create the zone for the Canadian GST: return to Admin => Configuration => Locations/Taxes => Tax Zones, select "Insert" and enter "Canada" for the zone name and "Canadian GST" for the description. Click "Insert," then select the folder for "Canada," click "Insert," select "Canada" from the Country list and then "All Zones" from the Zone list. Customers with shipping addresses in Ontario will be charged both the Ontario PST and the national GST, but customers with shipping addresses in other provinces will only be charged the GST.

1.3 Tax Rate

The last step is to set the rate for each tax. Go to Admin => Configuration => Locations/Taxes => Tax Zones and select "New Tax Rate." Select the Tax Class (e.g., Taxable Goods) and Zone from the drop-down menus. Now enter the Tax Rate (without a percent sign). For instance, the statewide sales tax rate in California is 7.25%, so you would enter "7.25" to create the tax rate for California. In the Canadian example above, you would enter "8" for the Ontario zone tax rate and "5" for the Canada zone tax rate. Customers in Ontario will be charged 13% tax -- the 8% PST and the 5% GST -- while customers elsewhere in Canada will only pay the 5% GST.