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Sales Tax Rates on Shipping Charges
Sales Tax Rates on Shipping Charges

Configure the sales tax rates that will apply only to shipping costs.

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Written by Anna Verbichenko
Updated this week

Some states consider shipping charges a necessary part of a taxable eCommerce transaction and require online sellers to charge sales tax on delivery charges.

This article explains how to complete the configuration of tax rates on shipping costs when configuring sales tax.


NOTE: If you need to configure other sales tax rates (as opposed to sales tax rates that will apply only to shipping charges), please follow the instructions in the article Sales Tax Rates.


To configure tax rates on shipping:

  1. On the Sales Tax page, locate the "Tax Rates on Shipping Cost" section. Use this section to specify tax rates that apply only to shipping charges.

    • X-Cart 5.3.x - Store Setup > Taxes > Sales Tax
      Use the "Click here to specify tax rates that will apply only to shipping charges" link to access this section.

    • X-Cart 5.4.x - Store Setup > Taxes > Sales Tax

    • X-Cart 5.5.x - Store > Taxes > Sales Tax


    NOTE: Unlike other sales tax rates, when configuring tax rates that will apply only to shipping charges, there's no need to specify a taxable base manually because, in this case, the taxable base is always the cost of shipping.


  2. In the Tax rates on shipping cost section, click the button to add a new rate and specify the values for the following fields:

    • Zone: Specify the zone to which the tax rate should be applied.

    • Rate, (%): Specify the tax rate you require.

    Add as many rates as you need.

  3. Click Save changes to make the rates active. After setting tax rates on shipping charges, enable the tax for your store.

Important:

Use the tax classes feature if you need to use different tax rates for different shipping methods. It allows you to specify the tax rate for a shipping method by assigning appropriate tax classes to shipping methods.

Provided that you have tax classes defined, the tax rate configuration form will also have the Tax class field:

Use this field to specify the tax class for a tax rate. Afterward, go to the Shipping page in your store Admin area and appropriately assign the tax classes to your active shipping methods. See details here.

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