How to Set up and Configure WooCommerce Tax Rates?

Setting WooCommerce tax rates is one of the essential steps you need to take when setting up your WooCommerce store. If it is getting complicated to make it in compliance with your local area’s legal obligations, do not hesitate to seek professional help. 

WooCommerce strives to provide the most uncomplicated possible settings to make the process easier. Let’s walk through the basic process for setting WooCommerce tax rates. 

How to Enable WooCommerce Tax Rates

First, you need to navigate to the WooCommerce > Settings page from the WordPress dashboard. Here, tick the “Enable taxes and tax calculations” checkbox.

This will create a new tab for taxes on this page. You can access it by clicking the “Tax” tab. Now, the window should look like the image below:

Let’s have a look at each setting in detail.

Prices Entered With Tax

Here, you must decide how you enter the prices of your products. There are two options where you can choose whether or not to add taxes to prices on your WooCommerce store.

If you choose the second option, WooCommerce will not add taxes to prices. In this case, you need to calculate tax as an additional price component in the checkout process.

Calculate Tax Based On

This setting will determine the location you are using to charge taxes. You can choose any of the three options from the drop-down menu.

Shipping Tax Class

This is where you determine the shipping tax class of your WooCommerce store. 

In most cases, the shipping tax is based on the items in the cart. In short, if a customer adds a product with a different tax rate, the shipping tax will also be charged at that rate. 

This is also the default option. You can choose a different shipping tax class if your tax jurisdiction does not allow this.

Finally, if you have set a custom tax class, you can also see it among the choices in the drop-down menu.

Rounding

This checkbox specifies whether or not rounding tax. You can tick it if you want to round taxes to a subtotal rather than the default per-line rounding.

Additional Tax Classes

You can create additional tax classes if needed. Besides the standard tax rates, WooCommerce also set up two more tax classes for you by default: “Reduced Rate” and “Zero Rate”.

To create new tax classes, enter their name (one per line) in the text field. After you create and save the new tax classes, they will be displayed at the top of the window.

You can set the tax rates for the newly created tax classes on your WooCommerce store by clicking on the name and entering all required data.

Display Prices During Cart and Checkout and Display Prices in the Shop

These two settings determine how prices will be displayed—whether they include or exclude taxes—on your WooCommerce store.

Price Display Suffix

Fill in the textbox if you want to display some text after products’ prices. This could be something like “VAT included”.

Display Tax Total

Finally, you can set how tax totals are displayed during checkout—whether multiple taxes are pooled as a total or each listed as a separate entity. 

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Once the settings have been updated, do not forget to click the Save Changes button.

How to Set WooCommerce Tax Rates?

Once configuring the general tax settings, you can set tax rates for your WooCommerce store.

As WooCommerce Shipping classes, all the tax classes will be shown as different tabs on the page. You can go to one of them and create a tax table for your WooCommerce store. 

For example, if you click the “Standard rates” text, you will see the different tax rates you have set up in multiple rows. You can add/remove rows here.

Let’s see how to set up a new WooCommerce tax rate. Click the Insert row button to get started.

An additional row will be added. You can start filling in the relevant information as explained below:

Country code

You can fill in a 2-letter country code. You can find your country code on this Wikipedia page. Leave this field blank if you do not want to specify a country.

State code

Similar to the country code, you can enter a two-digit code for states if applicable. If you do not want to specify a particular state, leave the field blank.

Postcode/ZIP

There are several ways you can enter a zip/postcode of an area. When entering multiple codes, you can separate them with a semicolon. 

This field also allows wildcard characters and numeric ranges. For example, you can add “80*” to apply the tax rate to all the codes that start with 80. Similarly, you can enter a range, such as “80001…80009”, to apply the tax rate to all the codes in that range.

City

Next, you need to identify the city/cities where this tax rate applies. You can enter multiple cities separated by semicolons. 

Like in other cases, you can leave this field blank to apply the rate to all cities in a country or state.

Rate

This is where you specify the applicable tax rate on your WooCommerce store. To set a 10% tax rate, you must enter 10,0000. And, for a 12.5% tax rate, enter 12.5000.

Name

You can give this tax rate a name. For example, Sales Tax, VAT, etc.

Priority

You can choose the priority for this tax rate. You must define only one matching rate per priority. 

In case you want to specify multiple tax rates for the same area, you must set a different priority for each of them.

Compound 

If you want this tax rate applied on top of all other taxes, tick this checkbox. Imagine the scenario where you have an additional tax for a particular jurisdiction along with the regular sales tax. 

This option determines whether the additional charge is based on product prices alone or product prices as well as regular sales tax. 

Shipping

If you want this tax rate to apply to shipping, tick this checkbox. If so, the tax rate will be calculated based on product prices and shipping charges. Otherwise, it will be calculated based on product prices only.

Once you enter all relevant values, remember to save the change to apply the tax rate to the customers of your WooCommerce store who come from the specified region.

WooCommerce Tax Rates Example

Here is an example scenario of how you can set different VAT rates for your WooCommerce store.

Let’s say you want to charge different tax rates for customers from various regions. For example, you can set the tax rate at 6% across the US.

On the cart page, this tax rate will be applied when a US address is entered.

Now, let’s set another charge for a particular state. Let’s say you want to charge a tax rate of 7.125% for California. You can add another tax rate for this state and set its priority as 1.

Now, when a customer enters a California address, this rate will be applied instead of the typical US rate of 6%. 

Sometimes, you may want to charge additional tax rates for just one city or zip code. 

How will you manage this? Here is an example. Let’s set an additional tax rate of 2% for the zip code 90001 and its priority as 2.

When a customer enters this zip code, an additional tax (2%) will be applied along with the sales tax rate for California, which is 7.125%.

How To Delete WooCommerce Tax Rates?

If you want to remove tax rates in WooCommerce, you can eliminate specific rates or all of them at once.

To eliminate rates individually, pick one or more rows (on Window, hold CTRL, or click CMD ⌘ on Mac and choose the desired row), then click the Remove selected rows button. Finally, hit the Save changes button.

To delete tax rates in bulk, navigate to WooCommerce > System status > Tools and select Delete all tax rates button.

Top 3+ best WooCommerce tax rates plugins

Many WooCommerce business owners struggle with determining the exact tax amount to be collected. Furthermore, submitting returns on time might be a yearly challenge. We’ll look at some of the most popular plugins for handling sales tax computations.

WooCommerce Quaderno

Rating: 4.7/5 (16 reviews)

Price: $49 per month

Quaderno is one of the best WooCommerce plugins that help you handle taxes with ease. You can quickly integrate your store, payment gateway, and shopping cart with Quaderno and manage tax-related concerns. 

When a customer attempts to make a purchase at your store, Quaderno will automatically calculate the applicable tax. Furthermore, it will monitor your tax compliance and notify you when you exceed foreign tax thresholds. You will also have access to simple reports that will make tax filing a breeze. 

TaxJar – Sales Tax Automation for WooCommerce

Rating: 3/5 (22 reviews)

Price: Start at $17 per month (Free trial included)

TaxJar is another recommended alternative solution for automating sales tax calculation, reporting, and filing. It will seamlessly integrate with your WooCommerce store. It is simple to integrate with your WooCommerce cart or other selling channels such as marketplaces. 

By arranging sales data into easy-to-read, exportable, return-ready state reports, TaxJar saves hours on sales tax filings. With TaxJar Reports, you can complete your returns fast and even file them automatically if necessary. 

WooCommerce AvaTax

Rating: N/A

Price: Start at $50 per year (Free trial included)

Another option when it comes to the best WooCommerce plugin for simplifying tax calculations on your WooCommerce store is WooCommerce AvaTax which is created by SkyVerge. This plugin will assist you with tax filing and return processing. You can stop guessing about your tax rates with WooCommerce AvaTax and immediately streamline tax rate computation and management.

Besides, regardless of where your clients come from, you will be able to collect tax accurately without having to manually set up tax rates. Rather than manually entering a slew of tax and shipping rates into your store, you can utilize Avalara’s tax codes to automatically calculate the proper tax for each order depending on your store and client addresses.

To make return filings as (relatively) straightforward as possible, all tax information will be appropriately recorded in your Avalara account.

Sovos Taxify

Rating: N/A

Price: Start at $47 per month

Sovos Taxify is another option when you are looking for the best WooCommerce tax rate plugin. It provides hassle-free tax calculations, even when tax rules change frequently. It will automatically handle your tax compliance by automatically updating rule changes in a timely manner.

Taxify combines award-winning software with a tax expert on their managed services team to deliver a comprehensive solution for small to medium-sized enterprises’ sales tax reporting issues.

Sovos Taxify gives you access to automatic tax computations and returns in over 14,000 different tax jurisdictions. 

It Is Time to Set Your Own WooCommerce Tax Rates

WooCommerce tax rates are not complicated. It is the complicated tax regulations that differ for different jurisdictions that are confusing a lot of shop owners. Therefore, you are better off getting professional help if selling to various locations. 

Hope this article helped you set tax rates on your WooCommerce store. Feel free to leave a comment in the section beneath the article if you have any queries.