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General

The Tax calculation depends on the several aspects like:

  • Magento Tax Settings
  • eBay Tax Settings
  • Account Settings.

So to understand the process of Tax Calculation it is necessary to look into the logic of each of these aspects separately.

Magento Tax Settings

Tax Classes

Magento system has 3 main Tax Classes:

  • Product Tax Class
  • Customer Tax Class
  • Tax Zones/Rates
Product Tax Class

The Product Tax Classes are available in Sales > Tax > Product Tax Classes:

These Tax Classes can be added to the Magento Products using the Tax Class option

So they define what Tax should be added for a particular Product.

Customer Tax Class

The Customer Tax Classes are available in Sales > Tax > Customer Tax Classes:

These Tax Classes can be assigned to the particular Custom Group in Customers > Custom Groups > Tax Class:

Thus it defines what Tax should be specified for a particular Buyer.

Tax Zones & Rates

The Tax Zones & Rates are available in Sales > Tax > Manage Tax Zones & Rates

In the Tax Rates & Zones settings, you can select a Country, State, ZIP/Post Range/Code, and the Tax percent which should be used for them.

These settings allow defining for which location what Tax should be applied.

Tax Rules

Tax Rules contain a combination of  Product Tax Class+Customer Tax Class+Tax Rate & Zone. So it means that it defines what Tax should be for the particular Product, which was bought by a particular Customer from the particular Zone (Country, State, etc.).

Tax Rules can be added in Sales > Tax > Manage Tax Rules by pressing Add New Tax Rule.

So the Magento Tax is calculated based on the Tax Rules for a particular Order.

For example, your Magento Product is set up to use the Tax Class Taxable Goods.

The Buyer which ordered is related to the Customer Group General.

And the Item should be sent to California.

In the Tax Rules, you have the Rule to add 15 % for the General Customer Group, Taxable Goods, and California orders

So your Magento Order will contain 15 % of Tax for such Item.

Note, if one of the Tax Rule components (Product Tax Class, Customer Tax Class, or Tax Rate) is different from the data in Magento Order, the Tax amount will not be added. Only when all 3 Tax Classes are the same as in the Tax Rule it will be applied to the Magento Order.

Magento System Settings

Should the tax be added to the Price value? Or it should be added to the Shipping Cost? How the Price value should be displayed in Magento Products - Including or Excluding Tax? The answers to these questions depend on the Magento settings in System > Configuration > Sales > Tax.

Please note, the settings in this section have the Website/Store View Scope. So they can be edited for a particular Website or Store View of your Magento.

Tax Classes

You can select one of your Products Tax Classes to use it for Shipping Tax calculation.

Calculation Settings

Catalog Prices

  • Excluding Tax - means that the Price you set in Magento Product will be shown without Tax value.

So the Tax value will be added to the Price.

For example, Tax percent is 5.25%. Thus the final price will be 105.25$

  • Including Tax - means that the Price you set in Magento Product will be shown with the Tax amount in it.

So if your Price is 100$, but the amount of Tax in it is 11.07$. Thus the Price of the Product is 88.93$.

Shipping Price

Magento Shipping Price depends on the Shipping Method used for the Item.

It can be displayed in two ways:

  • Excluding Price - means that the Shipping price you set will be shown without Tax value.
  • Including Price - means that the Shipping price you set will be shown with Tax amount in it.

For example, you specify the Shipping Price equal to 10 $. The Tax percent is set to 5%.

If the Excluding Price option is selected, the Tax will be added to the Shipping Price:

10$ + 5% = 10.5$.

So the final Shipping Price will be 10.5$.

If the Including Price option is selected, the Tax amount will be included in the Shipping Price:

10$ = 9.5 $ of Shipping Price + 0.5 $ of Shipping Tax Amount.

Orders, Invoices, Credit Memos Display Settings

Display Prices

  • Excluding Tax - means to display Price without the Tax amount in them for Magento Orders;
  • Including Tax - means to display Price including Tax amount in them for Magento Orders.

Display Subtotal

  • Excluding Tax - means to display Subtotal value without Tax amount in it for Magento Orders;
  • Including Tax - means to display Subtotal value including Tax amount in it for Magento Orders.

Display Shipping Amount

  • Excluding Tax - means to display Shipping Amount without the Tax value in it for Magento Orders;
  • Including Tax - means to display Shipping Amount including Tax value in it for Magento Orders.

Include Tax In Grand Total

  • Yes - means to display Grand Total including the Tax amount in it for Magento Orders;
  • No - means to add Tax amount into Grand Total for Magento Orders.

eBay Tax Settings

eBay Sales Tax Table

On eBay, you can add a Tax Rate which then you can use in M2E Pro. So you should log into your account and go to Account > Site Preferences > Payment from Buyers > Use Sales Tax Table and press Edit button.

Note, this option is available only for eBay US.

Then you will be able to enter the tax rate you want to charge for each State. Leave the field blank if you do not charge tax in a specific state. Optionally, you can indicate whether you want to charge sales tax on Shipping & Handling by ticking the box in the line.

The values you provide here will be used to calculate sales taxes on the final price (and if you indicate on shipping and handling) of the Item.

Taxation Settings in Selling Policy

Under the Taxation section in your Selling Policy, you can set your tax preferences depending on the eBay site that you are selling on.

Enable the Add VAT Rate option if you want the VAT rate to be applied to your items listed on eBay.co.uk and any European eBay site.

In a separate field, you can enter the relevant VAT amount (%) that will be submitted to eBay.

If you need to provide a VAT rate of 0%, simply set the Add VAT Rate option to "Yes" and enter "0" in the VAT Rate (%) field. The VAT rate of 0% will be submitted to eBay.

A tax rate will be added to or included in Item Price according to the Add VAT% on top of Price option located in the Price section below:

  • Yes - VAT Rate will be added on top of an item price.
  • No - VAT Rate will stay included and an item price will not be changed.

Click here for detailed info on how the final eBay item price is calculated taking into account the Add VAT % on top of Price option.

When listing items on the US, CA, or eBay Motors sites, you can use eBay Tax Tables previously configured in your Seller Center. 

Account Settings

You can select the Tax Sources, which you would like to use for Magento Order creation for eBay Orders. It can be set up in your Account settings in eBay > Configuration > Accounts

  • If None options are chosen - it means that the Magento Order will not contain Tax values;
  • If you select eBay as a Tax source - it means that the Tax in Magento Order will be calculated based on the eBay Settings;
  • If the Magento option is selected as a Tax source - it means that the Tax in Magento Order will be calculated based on the Magento Settings;
  • If you prefer to use eBay and Magento option, then the Magento Order will contain Tax calculated based on eBay Settings, but if eBay Tax is not set then Magento Settings will become a base for Magento Order Tax calculation.


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