Some states consider shipping charges to be 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 cost in the process of configuring sales tax. Note: If you need to configure general sales tax rates (as opposed to sales tax rates that will apply only to shipping charges), please follow the instructions in the article Setting up General Sales Tax Rates.
To configure tax rates on shipping:
1. On the Sales tax configuration page (Store setup > Taxes, Sales tax tab), locate the section Tax rates on shipping cost. This section is used to specify tax rates that will apply only to shipping charges. Depending on the version of X-Cart software you are using, you may need to click on the link Click here to specify tax rates that will apply only to shipping charges to access this section.
Note: Unlike with general 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:
3. Add the tax rate you require:
- Zone: Specify the zone to which the tax rate should be applied.
- Rate, (%): Specify the tax rate you require.
If necessary, use the New rate button to add rows for more tax rates. Complete the fields in each row as you require.
Please note that your settings are not saved until you choose to save them with the Save changes button.
After completing the setup of tax rates on shipping charges, be sure to enable the tax for your store.
If you need to use different tax rates depending on the shipping method, you can use the tax classes feature. This feature allows you to configure different tax classes for use with different tax rates and specify which tax rate should be used for which 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 to which the tax rate must apply.
After configuring the necessary tax rates for your shipping tax classes, go to the Shipping methods section (Store setup > Shipping) and assign the tax classes to your active shipping methods as you require.