Generally, the tax rate for a product is calculated according to the geographical shipping location of a customer. We will now see how we can enable taxes for a product, and how we can enter the tax class, rates, and grouping information for it.
Let's apply the default tax class to the product under the Data tab. It is called Taxable Goods by default. The right-hand side of the page shows the result when the edited product is added to the shopping cart.
Assume that our store also ships to Germany. Now let's add the tax rate for customers who will order from Germany. We will need to define the tax zone. Let's go to System | Localisation | Geo Zones and then click on the Insert button. We have added all the geo zones of Germany. Let's go to System | Localisation | Taxes | Tax Rates and insert the following tax rate and connect it with the geo zone.
Go to System | Localisation | Taxes | Tax Classes, edit Taxable Goods, and insert
Sales tax 19%in the Tax Name field for the newly added tax rate.Now if we open a test customer account with a shipping address from Germany, log in to the system, and add a product to the shopping cart, we will see that the correct tax value is applied.
By default, the prices are shown inclusive of tax. It is possible to change this setting. Here is how to do it. Click on the System menu, click on Settings, and edit the Option tab. Now the front page shows the price without the tax included, as shown on the right-hand side of the following screenshot:
