Know Your Magento 2 Tax Configuration
Magento calculates and applies tax based on tax rules. Each tax rule is associated with a particular customer tax class, product tax class, and tax rate. Each tax rate is associated with a particular tax zone.
Customer tax classes are assigned to customer groups. From the Admin, go to Stores / Customer Groups.
Product tax classes are assigned to individual products. From the Admin, go to Products / Catalog.
The defaults for customer tax class and product tax class are defined under Stores / Configuration / Sales / Tax. Typically:
Default Tax Class for Customer = Retail Customer
Default Tax Class for Product = Taxable Goods
Setting a Tax Rule
- From the Admin, go to Stores / Tax Rules
- Click on Add New Tax Rule and fill the pertinent fields:
Name — the name of the tax rule
Customer Tax Class — the customer group to which the tax rule applies
Product Tax Class — the product group to which the tax rule applies
Tax Rate — the rate used when the given tax rule is applied
Priority — used when multiple tax rules are applied
Subtotal Only — used when tax is applied to the order subtotal only
Sort Order — the position of the tax rule when used with others
- A typical tax rule for a Los Angeles store might be:
Name — California
Customer Tax Class — Retail Customer
Product Tax Class — Taxable Goods
Tax Rate — US-CA-*-Rate 1
Priority — 0
Subtotal Only — 0
Sort Order — 0
- Click on Save Rule.
Creating a Tax Class
- On the New Tax Rule page (when a new tax rule is being defined), expand Advanced Settings.
- Click on Add New Tax Class in either the Customer Tax Class section or the Product Tax Class section.
Setting a Tax Rate
From the Admin, go to Stores / Tax Zones and Rates.
- Click on Add New Tax Rate and fill the pertinent fields:
Tax Identifier
Country
State/Region
ZIP/Post Code
Rate
- Click on Save Rate.