In this article we’ll guide you through setting up your tax settings on Tictail. We've divided the article into 5 categories for you:
- Do I have to pay taxes?
- How do I set my tax rate?
- Can I have multiple tax rates in my shop?
- Should I include tax in my prices?
- How does Tictail calculate tax?
1. Do I have to pay taxes?
We recommend that you follow your country's tax laws and regulations when setting up a shop. As a shop owner, you are responsible for paying taxes. Please research your country's regulations for your type of business and adjust your shop's tax settings accordingly.
2. How do I set my tax rate?
2.1. To set your tax rate, go to Settings > Location & Legal.
2.2. Under "Tax applies in", determine whether you want that rate to apply in your country, region or world-wide. You must also indicate whether tax is included in your product prices and if you want to apply your tax rate to shipping fees.
3. Can I have multiple tax rates in my shop?
Unfortunately, you cannot have more than one tax rate in your shop. One work-around solution to this is to open multiple stores with different tax rates and link them to each other in a landing page or in your navigation bar; we realize, however, that this is not ideal and are working to create a more flexible tax structure.
4. Should I include tax in my prices?
You can choose whether or not you want to include tax in your product prices.
Including tax in your product prices generally increases customer satisfaction because shoppers will pay the initial price they see in your shop and won't be as likely to bounce once they see the added tax fee at checkout. Just remember to adjust your product prices to include the correct amount of tax so you're making your profit. If you choose not to include tax in your prices and switch the toggle, tax will be calculated and added on top of the item and shipping total.
Be sure to consider your audience when making this choice. European customers, for example, expect to see prices with tax included, while American generally expect tax to be added on top of the product price.
5. How does Tictail calculate tax?
Tictail calculates tax in two different ways, depending on whether you include tax in your prices or not. If you include tax in your prices, we will calculate tax using this formula: Tax = Price - Price / (1 + Tax Rate). If you don't include tax in your prices, tax will be calculated using: Tax = Price * Tax Rate.
Here's an example:
Let's say you sell a painting for 100 USD and your tax rate is set to 25%. If you include tax in prices, Tictail will calculate, using the formula above, that out of the 100 USD, 20 USD is attributed to tax (100 - 100 / 1.25). Note that the customer will still pay 100 USD for this painting. In contrast, when taxes are not included in prices Tictail will calculate that 25 USD need to be added (100 * 0.25) for tax and the customer will pay 125 USD for your painting.