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Tax Rates

You can find this section under Products > Tax Rates in the IRP Admin left navigation menu.

You use the Tax Rates section to add, edit or delete category- or country-specific tax rates for each country. These rates will be applied as long as the corresponding category and country restrictions are met.

For example, if a Children’s Books category has a tax rate of 5% in the United Kingdom, it will apply only if the customer has set their country setting to the United Kingdom and has a Children’s Book product in their basket.

Note that the 5% tax rate will apply only to items from the set category (Children’s Books in this case). Other items will be charged at the tax rates set against their specific categories, or the default tax rate if no category specific rate is set.

The main TaxRates.aspx screen appears as follows:

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You can see the tax rates that are configured for all of the countries in your system. If ‘Default Rate’ is displayed in the Category column, it means that the tax rate shown in the Tax Rate (%) column applies to all categories that do not have a specific tax rate set, for a country.

You can use the Search bar to find any tax rates in the system. Use the drop-down menus to limit the results to specific countries or categories.

You can also export the data by clicking the spreadsheet icon under the search bar. You can export to the following file types: CSV, TSV, Pipe, MS Excel or XML. For further options, click the Advanced button — you can then make selections using the following screen:

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NOTE that you can also add or edit tax rates in the Shipping Countries section. Any changes made in this section will be reflected in the Tax Rates section of the relevant Shipping Country on its ShippingCountryEdit.aspx page.

It is important that you configure your Tax Rates correctly. Otherwise you may see things happening such as your ‘Sold prices’ in your orders showing as lower than your ‘Instore Prices’. This could be because, for example, you have left a Shipping Country with a Tax Rate of 0 and therefore each of the items in an order will have the IRP Default Tax Rate of 20% (Application Settings > Vat Rate) subtracted from their prices.

How To Guides (2)

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How To Add, Edit or Delete Tax Rates
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How Tax is Calculated on Orders in the IRP

Tax Rates vary according to the country in which you are domiciled. Taking the UK as an example, the current standard VAT rate for most goods is 20%. Some goods are charged at a reduced rate of 5% (such as children’s car seats and some mobility aids) and other goods are charged a zero VAT rate (such as books and children’s clothes).

How To Configure Tax Settings in the IRP

Tax Rates are simple to configure in the IRP. There are only a few sections of the Admin that you need to deal with.

Default Tax Rates and Category-Specific Tax Rates

You configure your Default Tax/VAT Rate and Category-Specific Tax Rates in one of two places:

  1. Under Shipping > Shipping Countries (ShippingCountryEdit.aspx). In the Tax Rates section you provide two values:
    • Default Tax Rate: This is the Default Tax Rate for a country, to be applied to all non-specified product categories. If a country is tax-exempt, enter 0 for this setting.
    • Category Specific Tax Rate: Category Specific Tax Rates allow you to enter tax rates for categories. For example, children’s clothing should have a Tax Rate of 0% in the UK instead of the default UK Tax Rate of 20%. If a Category Specific Tax Rate exists and a customer has one or more products that belong to this category in their basket, the Category Specific Tax Rate will apply to these items rather than the Default Tax Rate.
      To add a specific Tax Rate for a Product Category, select the Product Category from the drop-down list and enter a valid numerical percentage Tax Rate value. Click the button to save the Category Specific Tax Rate.
      You can find a list of goods and services with reduced Tax Rates for the UK here. (See the Shipping Countries help topic for more details.)
  2. Under Products > Tax Rates (TaxRates.aspx): Again here you can set specific rates for individual categories and countries. (See the main Tax Rates help topic in this section for more details.)

Shipping Methods

You can also define a Shipping Method as being taxable or non-taxable on the ShippingMethodEdit.aspx page. In the vast majority of cases, a Shipping Method will be taxable. In the case of Royal Mail in the UK however, this should be false. Changing the Carrier will set this value to false if a Royal Mail integration type is selected.

If a Shipping Method is defined as taxable, then the appropriate Tax Rate will be applied to the cost of shipping when an order is made using this Shipping Method. This Tax Rate will be determined by the default rate of the destination country.

NOTE: The price you set in the IRP will be the price charged to the customer. For example for a shipping rule that charges £5.00 to the customer this means “£5 inclusive of VAT” and so:

  • To a country that is VAT-free, the price the customer will see is £5.00 and £0.00 VAT will be accounted for.
  • To a country that incurs VAT at 20%, the price the customer will see is still £5.00 but the IRP will account for £0.83 in VAT (5 - (5/1.2) = 0.83).

Application Settings

You can define the following tax-related Application Settings in the IRP:

  • Allow User Vat Status Changes: This setting allows users to see the price of their items with or without any sales tax added. This is useful if you have business customers who will be more interested in the price without tax. By default, all prices are displayed with tax included.
  • Tax Pricing Display: This setting defines how prices are displayed as default on the website, either 1 or 2. ‘1’ means that prices will be displayed inclusive of VAT; ‘2’ means that prices will be displayed exclusive of VAT.
  • Vat Rate: The Default Tax Rate in the system used when no Default Tax Rate has been set up on the Products > Tax Rates page.
  • Always Deduct VAT From RRP When VAT Free: When you check this box, Tax/VAT is always deducted from RRP values for Tax/VAT-free countries. When this box is unchecked, RRP values are displayed as normal.

How Tax is Calculated on Orders

It is important to understand that tax is calculated on the level of each individual item in an order and not on the order total. Therefore if an order contains, for example, three items, the tax on item one is added to the tax on item two and then the tax on item three. The total tax is then added to the total cost of the items. The order total will then include the cost of the shipping (if any) and any tax on the shipping (if applicable).

This explains why you may see a discrepancy of a few pennies if you try to calculate the tax on the order total, as this will be due to the rounding up or down of decimal places on the tax at item level.

Here are some examples to illustrate how tax calculations are constructed in the IRP:

Example 1:

  • Single item excluding tax = £32.48.
  • Shipping Method is Royal Mail 2nd Class delivery to UK which is free and, because it is Royal Mail, is non-taxable.
  • VAT (20% of 32.48) = £6.50.
  • Order Total (32.48 + 6.50) = £38.98.

Example 2:

  • 2 of the same items from Example 1 excluding tax (32.48 x 2) = £64.96.
  • Shipping Method is Royal Mail 2nd Class delivery to UK which is free and, because it is Royal Mail, is non-taxable.
  • VAT (6.50 (the cost of the single item as shown in Example 1) x 2) = £13.00.
  • Order Total (64.96 + 13.00) = £77.96.

Example 3:

  • Single item excluding tax = £214.99.
  • Shipping Method is Royal Mail Special Delivery to UK = £12.20 but, because it is Royal Mail, is non-taxable.
  • VAT (20% of 214.99) = £43.00.
  • Order Total (214.99 + 12.20 + 43.00) = £270.19.

Example 4:

  • 3 of the same items from Example 3 excluding tax (214.99 x 3) = £644.97.
  • Shipping Method is Parcelforce Express 24 to UK = £19.15 and, because it is Parcelforce, this is taxable.
  • VAT (43.00 (the cost of the single item as shown in Example 3) x 3) (20% of 19.15 (Parcelforce Tax (3.83)) = £132.83.
  • Order Total (644.97 + 19.15 + 132.83) = £796.95.

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