Know Your Magento 2 Tax Configuration

Published in

Endertech Insights

2 min readOct 23, 2017

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.