Setting up taxes
As an online merchant, you may need to collect taxes (sales taxes in the US, VAT in Europe and Japan, GST in Canada, etc) and then periodically forward the collected tax amounts to appropriate tax authorities.
What taxes should I set up
Taxation rules differ depending on the country where the online business is based — tax rates can depend on types of products, your business location, consumers’ location, and more. For example, merchants that sell e-goods to customers in the EU, should charge taxes on digital products.
Check with your local tax experts whether you sell taxable goods and what are the tax rates associated with them before moving forward with online sales.
How to configure taxes
If you are selling within the USA or the EU, please read the article US sales tax in Ecwid or EU taxes in Ecwid.
Once you know where your business is responsible for charging taxes, make sure to configure your Ecwid store to meet your local tax laws.
There are two ways to set up taxes in an Ecwid store:
- Automatic taxes. They are available for merchants in the USA, the EU, Canada, Australia and New Zealand. Automatic taxes provide up-to-date standard rates across the store and can be enabled in one button click.
- Manual taxes. If automatic taxes are not available for your country or you sell differently taxed products, you can configure taxes manually.
If you are based in the USA, the EU, Canada, Australia and New Zealand, you can enable automatic calculation of taxes in your store. As the result, the up-to-date standard tax rates of your country will apply to all products in your Ecwid store.
To set up automatic taxes:
- Enter your actual company address in the Ecwid admin, Settings → General. This address is needed to calculate and apply the right tax rate to orders at checkout.
- Enable automatic taxes in Settings → Taxes:
Once enabled, the automatic taxes will determine a precise tax rate at checkout depending on where you and your customer are located and will apply tax to each order.
You can manually configure your Ecwid store to calculate tax rates for different regions, zones, countries. You should set up taxes manually if:
- automatic taxes are not available for your country (currently available for the US, EU, Canada, Australia, and New Zealand)
- you sell differently taxed products, e.g. food and alcohol.
You can configure taxes manually in the Ecwid admin, Settings → Taxes. Here is the instruction on how to add a 10% tax for a state to illustrate the setup process:
Step 1 — Add a zone
Add a destination zone where the tax rate applies. If the same tax rate applies to several different states, you can create one zone consisting of these states and set up a tax rate for this zone. To add a zone:
- From your Ecwid admin, go to Shipping and Pickup → Zones.
- Click + Add New Zone.
- Set the name of the created destination zone that is clear to you (such as States with 10% tax rate, for example).
- Click Add State... (or Add Country.../Add Region) and add the necessary state(s) (countries/regions).
- Save the changes.
Step 2 — Add a tax rate for the zone
- From your Ecwid admin, go to Settings → Taxes. If automatic taxes are enabled, make sure to disable them.
- In the Manual block click Manage Tax Rates.
- Click Add New Tax.
- Enter your tax name (for example, 10% Tax).
- If the tax applies to all products, tick Enabled by default for all products option.
- Choose whether the tax applies only to the subtotal or to the subtotal + shipping.
- If necessary, click Manage tax displaying settings → Change Pricing Settings. This way, you can set whether you enter prices in your store with taxes included (gross prices) or without taxes (net prices). In case of net prices, the tax is added at checkout.
Your product prices will not be automatically updated if you switch the pricing scheme. You will need to check your product prices and update them manually after the switch to avoid unexpected price changes. - Choose what defines the zone for a customer. It can be the shipping or billing address.
- Click Specify rates per zone. Select the zone created earlier and enter the applicable tax rate.
- Make sure the tax is enabled and save the changes.
If you have many zones, repeat the steps above for each of them.
How to get a tax report
Different countries have unique tax reporting requirements. You should consult your local tax professionals on how and how often you should file and remit the collected taxes to government.
If you use an accounting software when working on tax reports, you can import there your store’s order data, including the collected taxes.
For automatic import of order data, you can connect your store with Quickbooks, Xero or Freshbooks accounting software (integration with these services is available in form of apps from Ecwid app market).
Otherwise you can export the order data from your store to CSV file, then import the downloaded CSV file into your accounting software or send it to accountant that handles it for you. You can also open the file in a spreadsheet and summarize the numbers manually if you like.
If necessary, you can also print out invoices (and/or tax invoices) for your records or download them as a PDF file.
