How to Add Tax in WooCommerce: A Step-by-Step Guide

Taxes not only pay for public goods and services, but they are also an important part of the agreement between citizens and the economy. Therefore, you need to pay sales taxes even for your WooCommerce business. 

However, how to add tax in WooCommerce?

Fortunately, WooCommerce offers a dedicated tab to configure your sales tax and makes it easy to comply with all applicable laws. With just a few clicks, you can add the taxes for your store and start collecting them from your customers.

In fact, WooCommerce provides a user-friendly interface and detailed documentation to simplify the process. 

Whether you want to apply standard rates or complex tax rules based on different regions, I’ll cover everything you need to deal with various tax requirements. 

And at the end of this article, you will get to know:

• Enable sales tax in WooCommerce 
• Configure WooCommerce tax settings
• Calculate and display tax for customers
• Common Woocommerce tax issues with solutions
• Best practices for handling taxes 

Let’s begin with online sales tax.

How to Add taxes in WooCommerce | 3 Easy Steps

Before configuring tax rates or classes, first you have to know how to add tax to Woocommerce orders. And, you can add or enable the WooCommerce tax with just 3 steps:

1. Go to WooCommerce > Settings > General.

2. Scroll down and under the General options, enable the Enable Taxes and Tax Calculations checkbox. 

3. Finally, at the bottom, click Save changes.

That’s it. Your tax is added to your WooCommerce store, and now, all the tax configuration options will show up.

How to configure tax options in WooCommerce

As you know, just enabling tax in your WooCommerce store isn’t enough. So, ou have to configure the tax classes and rates based on the locations of your customers. 

Woocommerce tax rates settings

Before setting up tax rates, you need to decide how you want taxes to be calculated and displayed. The settings you choose depend on the tax regulations at your shop’s location.

But, how to set up tax rates in WooCommerce?

To configure WooCommerce tax rate settings, simply navigate to WooCommerce >> Settings >> Tax tab.

Now, you’ll see all the settings options of tax and from there, you can set your tax according to your requirements.

Let’s break down each tax setting option here.

Price entered with tax:

This option allows you to show the prices of your store with tax or without tax.

• “Yes, I will enter prices inclusive of tax”- Enter the prices of products, including the corresponding base tax rate of your store. 
• “No, I will enter prices exclusive of tax”- Enter the prices of the products without any tax rate. When you select this option, the tax is automatically calculated and added to the actual product’s price during checkout.

Calculate tax based on

Tax rates always depend on the location. So, this option lets you choose which address will be used for tax calculations. 

Once you hit the drop-down, there’ll be 3 options based on Woocommerce customer tax:

1. Customer billing address- Tax will be calculated based on the location from where the bill is processed. 
2. Customer shipping address (default)-Tax will be calculated based on the shipping location of the product.
3. Store base address- Tax will be calculated based on your store’s location.

When you choose options 1 and 2, your customers need to enter their respective addresses. If you select Option 3, taxes are always calculated based on your store’s location, so your customers will pay the same amount of tax no matter what their address is.

Bonus Tip:

You can also add tax-exempt customers to your WooCommerce store. In this case, you need to create certificates for the tax exempt customers. 

The certification must include the state tax ID number, the names of the seller and customer, the type of exemption, and the customer’s signature and date.

WooCommerce Shipping tax

Woocommerce also offers shipping tax classes based on products. The class indicates the tax rates based on the value of the particular product.

Shipping tax class:

By default, you’ll get four options to manually insert tax rows for different shipping tax classes:

• Shipping tax class based on cart items 
• Standard 
• Reduced rate
• Zero rate

1. Shipping tax class based on cart items:

This is the most used and even best option, if you don’t have any particular tax requirements. This option means, the shipping tax will be calculated based on the products in your customer’s cart.

For example, if your customer adds some men’s shirts to their cart and the shirts are sold at the reduced tax rate, then the same tax rate will be applied to the shipping cost. 

But, what if your customer has multiple products from different tax classes in their cart?

Well, in this case, the shipping tax will be applied as follows:

• If an order includes any product with the standard rate tax class, then that rate is used for shipping, no matter what the other classes are.
• If there isn’t any product with the standard rate tax class, the first rate listed in the Additional Tax Classes section is used instead.

2. Standard tax class: 

The standard tax class is normally applied to most of the products. To set the standard tax class, navigate to Standard rates under Tax.

Once you are there, click on the Insert row, and then you need to input your details to add a new tax rate.

WooCommerce Standard Sales Tax Rates Setup:

Let’s take a look at the tax rate attributes you need to fill in.

Country code – Type in a two-letter code for your country. For example, in the United States, the country code is US. If you don’t specify a country, the default rate will be used for all countries.

State code – In the same way as in the preceding section, if you want this to apply to all states, leave the state code field blank. Otherwise, enter a two-letter code. For example, if it’s California, enter CA. 

ZIP/Postcode -Enter a postal code or codes, separated by a semicolon, in the “Postal Code” field. Using a dash (-) to demarcate the beginning and endpoints of a range is another valid option. If you’d like your application to be considered for all zip codes, just leave this blank.

City – Choose which city or cities this tax rate will be applied to. Use a semicolon to separate multiple cities if necessary. The standard practice for selecting all cities is to leave this field blank.

Rate – Set the value of the rate in percent. Use a format with four places after the decimal point, and don’t enter the mark%. Example: 19. Decimal numbers are only needed when the rate isn’t a whole number, like 7.3.

Tax name – Enter the tax name. Customers will be able to see the names of taxes displayed in the shop, as well as on WooCommerce invoices, among other places. Example: VAT 19%.

Priority – Priority entails selecting which of the rates should be used first. Keep in mind that if you set one priority for all of your tax rates, the first one will show up on your WooCommerce invoices. 

WooCommerce will calculate tax for each individual tax rate if you’ve set multiple tax rates for a single tax class with different weights.

Compound – Check this box if the rate is a mix of other rates. The compound tax will be added after the other rates have been calculated. This means that the rate for which you checked the box will be added to a product that has already been taxed.

Shipping – If you’re using WooCommerce to sell products online, you can choose whether or not to include sales tax in the shipping price. If you do not choose a shipping rate, no sales tax will be applied to your order. If you choose multiple shipping methods and rates, taxes will be calculated based on the order in which they were chosen.

3. Reduced rate rates:

Reduced tax rates include the lower rates that apply on products like luxury or essential items. In reduced tax rates, all the attributes are set as same as standard sales tax rates. Just, add the reduced tax rate here.

4. Zero rate rates: 

The tax-extreme rates have this zero rate tax. This zero tax applies on products like baby food, baby clothes, etc. All the attributes are set like the standard class, just here, add the value of rate zero.

And, this way you can manually insert tax rates by adding rows. When you add multiple rows, you have to set the priority of the rates that are serially decreasing.

Rounding

WooCommerce allows you to configure whether taxes are rounded at the subtotal level or at the individual line item level. However, this can slightly affect the final tax amount on an order.

Just, check the box of Rounded tax at subtotal level, instead of rounding per line.

So, once you check it, the tax calculation will be applied to the subtotal of the entire order, instead of rounding the tax for each line item in the cart. Again, it’s not necessary to round the tax for each item, so I’ll recommend you check mark the option.

Additional tax class

Now, what if you want to add multiple tax rates in WooCommerce?

Well, Woocommerce offers you to include multiple additional tax class if you want. Standard is the default option. However, you can choose reduced rate or zero rate or even both based on the priority.

For example, If you set the shipping tax class as standard, but there is no applicable products for standard tax, then the system will count the reduced rates as the tax class as the 1st priority. Still, if there is no products for reduced rates either, then the zero rate will be selected as the 2nd priority.

Now, you might think, how to add tax to digital products in WooCommerce?

Well, the process is all same. Just add a class named digital products in the Additional Tax Classes. Whenever, you define any item as a digital product, it will automatically grab the tax rate from that additional tax section.

Display tax in WooCommerce

Now, it’s time to display tax in your Woo store. You can display either WooCommerce tax excluded prices or WooCommerce tax included prices based on your requirements.

Display prices in the shop

Now, you have the option to display the product prices of your store with or without tax.

Display prices during cart and checkout

Again, when your customers come to add to cart or checkout section, you can show the cart prices with tax or without tax.

Price display suffix

You can also fully customize the text that appears next to your product prices. It’ll help your users understand whether taxes are included or not. WooCommerce offers two pre-made placeholder options for this: {price_including_tax} and {price_excluding_tax}.

Display tax total:

In this section, you can show the tax on a single total of multiple products or show tax individually of each item that your customers are purchasing.

Itemized – If there are multiple products in the cart, each product will display its own tax separately.

As a single total – If there are multiple products in the cart, WooCommerce will calculate the total tax for all products and display it as a single value.

Woocommerce Tax Calculation

However, you might be wondering can Woocommerce calculate tax for your store products?

Yes, Woocommerce automatically calculates sales tax based on your customer’s city, country, or state.

But, how does WooCommerce calculate tax based on your customer’s shipping address?

Well, there are basically 3 ways to calculate tax in WooCommerce.

WooCommerce tax calculator

This is the manual process to calculate the Woocommerce tax. But, you don’t need to go through a lengthy process. 

When you check the Enable Taxes option in WooCommerce, it automatically calculates your tax based on the shipping process.

WooCommerce tax rate plugin

In case you prefer not to manage WooCommerce taxes manually, there are many WordPress plugins available to automatically calculate sales taxes.

And, if you want to use plugins to automate sales tax, you can consider these popular options:

• WooCommerce Tax plugin
• TaxJar
• Avalara AvaTax

Again, you can check out the top Woocommerce tax plugins to help automate sales tax calculations in your WooCommerce store.

But, here is a fact to consider.

When you enable automated WooCommerce taxes, many settings will be disabled from Woocommerce Tax section because the plugin overrides the core tax settings. Automated taxes will replace any manually added tax rates.

Again, if issues arise with automated taxes, make sure the logging section is enabled to diagnose and troubleshoot. 

To check if the logging is enabled or not, go to WooCommerce >> Status >> Logging.  

Again, enable the debug mode to ensure your automated taxes run smoothly. The debug log will show issues on the system status page and provide useful information for troubleshooting.

WooCommerce calculate tax programmatically

Sometimes, some store owners don’t prefer to invest in any tax plugin or use the basic tax calculator. In that case, you can add the tax to your Woocommerce store programmatically. 

You don’t have to be an expert coder to do this. If you have general knowledge of coding, you can do this easily.

For example, if you want to add the total tax to the checkout or cart section of your customer, the code is below:

add_action( 'woocommerce_calculate_totals', 'action_cart_calculate_totals', 10, 1 );function action_cart_calculate_totals( $cart_object ) {
    if ( is_admin() && ! defined( 'DOING_AJAX' ) )        return;
    if ( !WC()->cart->is_empty() ):        $cart_object->cart_contents_total *= .10 ;
    endif;}

//Code for removing tax from total collectedfunction prefix_add_discount_line( $cart ) {
  global $woocommerce;
  $discount = $woocommerce->cart->tax_total;
  $woocommerce->cart->add_fee( __( 'Tax Paid On COD', 'your-text-domain' ) , - $discount );
}add_action( 'woocommerce_cart_calculate_fees', 'prefix_add_discount_line' );

Just copy the code and add it in the plugin.php section of your child theme. And, the tax will be automatically calculated and placed at the checkout panel.

How to import & export WooCommerce Tax Rates

You can import or export your Woocommerce tax rates. If you have a proper file with accurate tax rates, you can easily upload the file and apply different rates for different states.

Importing and exporting tax rates

Now, as your tax file is ready, do you want to import or export the tax rates?

Well, importing or exporting tax rates includes just 3 steps.

• Simply go to Woocommeerce >> Settings >> Tax tab. 
• Choose a particular tax options. Standard, reduced or zero.
• Finally, just hit on the import or export option at the buttom and download the CSV tax file.

Now, to create a Woocommerce tax CSV file for importing tax rates, it’s recommended to start by adding a tax rule manually, then export it as a CSV. 

This file will have the 10 columns needed for a tax rate import and can be used as a template for changes or additions. 

The columns are:

country code, state code, postcodes, cities, rate, tax name, priority, compound, shipping, tax class

You can choose the file from your PC or directly paste the address to your file. And once you hit on Upload file and import, you’ll have a downloaded ready-to-import tax rates (CSV).

Note:

Leave the Tax class blank for standard rates. Don’t use this file for live purposes, as tax rates change frequently. 

Deleting tax rates

If some of the tax rates are changed for your products, you can easily delete the tax rates from your tax settings.

• Go to WooCommerce >> Settings >> Tax.
• Click on the row which tax rate you want to delete. If you want to delete multiple rows, hold shift and then click on the rows one by one.
• Hit on the Remove selected row(s) and  finally click on save changes.

Previewing WooCommerce taxes on the checkout page

Now, you’re all done adding tax to your Woocommerce store. It will automatically calculate the tax based on your customer’s cart or address in the checkout section.

However, you may need to preview your woocommerce tax to track taxable sales and liabilities and even align your financial planning.

To view tax reports for your Woocommerce store, simply go to Analytics >> Tax.

Here, you can see the complete tax reports for your WooCommerce store, including:

• Total tax
• Order tax
• Shipping tax
• Orders

You can also select a date range to view the tax report for a specific time period.

Even better!

You can compare different tax data to deeply analyse the tax reports.

To compare reports for different tax codes, go to the Show field and select ‘Comparison.’ Then, enter the WooCommerce tax codes you want to compare in your store.

At the bottom of this analytics page, you’ll find a detailed breakdown of the taxes. It will show the tax code, tax rate, total tax, order tax, shipping tax, and the number of orders.

For a more advanced tax reporting tool that sorts your taxes by code or date, go to WooCommerce >> Reports.

In the Taxes section, you’ll find all the tax reports collected in your store.

Most Common Woocommerce Tax Problems and Solutions:

Many people face different types of issues when they’re dealing with the tax for their woocommerce store. Here are most 3 common tax problems that you can often face and even the solutions to troubleshoot tax issues in WooCommerce.

Tax options greyed out

If your settings are greyed out, it might be because Automated taxes is enabled. In this case, most of this document won’t apply as an additional plugin manages your taxes automatically.

To make the tax options work, change the Automated taxes setting to Disable automated taxes and click Save changes. This will restore the normal functionality of WooCommerce tax settings.

WooCommerce tax not showing in cart

Sometimes, you configure all the settings of Woocommerce tax, but forget to enable the tax options for your shop. And, that’s where, the woocommerce tax not showing in cart error arises. So, make sure the following 2 tax options are enabled:

• Display prices during cart and checkout and 
• Display prices in the shop.

WooCommerce tax tab missing

If you don’t see any Tax tab in your Woocommerce panel,, make sure taxes are enabled for your store:

• Go to WooCommerce > Settings > General.
• Check the Enable tax rates and calculations option.
• Click on Save changes.

Best practices for handling taxes in WooCommerce

Maintaining taxes is a must for any ecommerce business. If you don’t handle your taxes properly, it’ll definitely eat your profits, doesn’t matter how many sales you’re making.

So, here are some best practices to maintain your tax for your Woocommerce store.

1. Keep updated about your tax:

Taxes depend on several factors, so the rates keep changing rapidly. And if you use an outdated tax rate, it will directly hamper your sales and even conflict with the tax law. That’s why you should always be aware of the latest tax rates on your products and adjust them accordingly.

2. Make the tax information transparent to your customers

When your customers’re purchasing any products, they never want to get any surprises, especially with the prices.  So, hiding the tax rate from your customers is never going to boost your sales. 

Rather, you should always be transparent and keep the tax information clear to your buyers.

Bonus Tip:

The best practice to attach tax information to your customers is to add tax details to the invoice. And, you can easily generate PDF Invoices (with proper Tax Rates) with a free plugin-Challan and attach the tax report to the invoice, even the packing slip.

3. Seek help from professionals for any issue

If you’re facing some issues with taxes, don’t try to apply random tactics to fix them. Always try to get in contact with a tax expert to handle your tax properly and minimize your tax liabilities.

Final thoughts 

The process of adding tax rates to WooCommerce can be time-consuming. Thankfully, WooCommerce makes it easy to set up your tax settings and tax calculations.

We’ve gone over everything you’ll need to know to properly configure WooCommerce tax settings. Remember that your tax situation will vary based on the selling location and other legal requirements. Therefore, you should be careful when determining tax rules in WooCommerce.

FAQs:

1. How do I add VAT/ GST tax to WooCommerce?

Just like some U.S. states add sales tax to purchases, other countries have their own taxes like Value Added Tax (VAT) or Goods and Services Tax (GST). These taxes apply to sales of goods by both for-profit and not-for-profit businesses.

To set up EU VAT rates for your Woo store within a new tax class, follow the steps below:

• Go to WooCommerce > Settings > Tax.
• Select the Additional tax classes setting.
• Add a new tax class to the list, such as, clothes
• Click Save changes.

2. What is the difference between tax included and tax excluded prices in WooCommerce?

Here are 2 main differences between tax-included and tax-excluded prices in WooCommerce:

Aspect	Tax Included	Tax Excluded
Display for Customers	price includes tax. Example: $110 for an item with a 10% tax.	price excludes tax. Example: $100 for an item, with tax added at checkout.
Calculation at Checkout	Tax is added to the item price. Example: $100 for the item, plus $10 tax (total $110).	Tax is separated from the total price. Example: $100 for the item and $10 for tax (total $110).