Welcome to Magento 2 Tax Tutorial Part 3. Previously we looked at configuring Tax Rules and Rates within the admin, Tax Classes and the effect on applying multiple rules against customers.
In the first post we configured a product’s price in the admin to exclude tax, so that Magento would the include tax on the price if a customer met the tax rule criteria. Now let’s configure the prices so that they exclude tax.
This can be done by changing the
Catalog Prices dropdown value within
Stores -> Configuration -> Sales -> Tax, under the
Calculation Settings section.
After saving the changes and refreshing the cache, you should notice that on the frontend, the price including tax becomes $100, and the price excluding becomes $83.98.
Currently, we’ve been showing prices on the frontend both excluding and including tax. However, when adding the test product to the cart, only the prices excluding tax show.
These price display options are configurable within the admin under the
Shopping Cart Display Settings section within
Stores -> Configuration -> Sales -> Tax.
As mentioned in the previous post, the
Shipping Origin setting can affect the product prices displayed if the prices have been entered into the admin including tax.
To simplify this scenario, let’s look at an example:
Tax Calculation Based Onoption is set to
Default Tax Destination Calculationoptions are set to
United Statesand the state set to
US-CA-*-Rate 1rate of 8.25% that Magento provides as default, and which was used in the first part of this tutorial
With the above options configured, you should see the product’s price both excluding and including tax is $92.38, even though the price entered in the admin was $100, which includes tax.
US-CA-*-Rate 1 tax rate configured is not applied (as there is no difference in price excl. and incl. tax), which is correct behaviour as Magento will not apply the rate as within the
Default Tax Destination Calculation options, the
Default State is set to
* and not
The reason Magento shows this price is due to the
Shipping Origin section, located in
Stores -> Configuration -> Sales -> Shipping Settings.
Region/State options are set to
United States and
California respectively, Magento seems to subtract the 8.25% from the
US-CA-*-Rate 1 rate, but not include this as part of the tax calculation.
That means if multiple tax rules are active at the same time, in this example, the product price including tax will remain at $92.38, then the price excluding tax will be calculated accordingly.
This can potentially create a lot of confusion so bear this in mind when adding product prices in the admin including tax. Changing the
Default State to
California so it matches the
Region/State option in the Shipping Origin section seems to correct the issue so that the product’s price including tax changes to $100 rather than $92.38.
Magento along with a product and customer tax classes, also provides a
Tax Class for Shipping option located under the
Tax Classes section within
Stores -> Configuration -> Sales -> Tax. Change the dropdown option from
Taxable Goods to add tax to the shipping method chosen by the customer on the checkout page.
If you head to the checkout page and look at the order review step, you’ll notice that your shipping method chosen has had tax added on.
Note: This article is based on Magento CE version 2.1.7.