WooCommerce Tax Guide

You can find information on how to install the WooCommerce Shipping & Tax extension on the WooCommerce Shipping & Tax page. This documentation is around the extension’s tax functionality. For more details around general setting up of taxes in WooCommerce, please see the Setting up Taxes in WooCommerce documentation.

To enable automated tax calculation, first ensure that “enable taxes and tax calculations” is checked on WooCommerce > Settings > General.

With taxes enabled, go to WooCommerce > Settings > Tax, select “Enable automated taxes” and Save Changes.

Once Automated taxes are enabled, many of the settings are disabled as Automated taxes “take over” from the WooCommerce core tax settings. This means that “Display prices” will be set to Excluding tax and tax will be Calculated using Customer shipping address.

Just of note, Automated tax calculation depends on prices to be entered exclusive of tax.

When Automated taxes are in use, this overrides any tax rates you have manually added for locations where you have a tax nexus, as well as the “Compound” and “Shipping” toggles for those tax rates.

After switching to automated rates, a backup of your previous tax rates is created and can be found in your sites wp-content/uploads folder.

The “Automated Taxes” feature supports United States, Canada, Australia, and United Kingdom based stores, plus a growing list of countries in the rest of the world including: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden.

If your store is based in the EU, we recommend using our EU VAT Number extension in addition to automated taxes.

To diagnose issues with your WooCommerce Shipping & Tax setup, go to WooCommerce > Status > WooCommerce Shipping & Tax.

If you’re experiencing issues, enable debug and/or logging.

The system status page displays issues that could cause WooCommerce Shipping & Tax to stop functioning and contains helpful debug information, plus links to get further assistance.

The most recent tax requests can be seen on the WooCommerce > Status > WooCommerce Shipping & Tax under the Taxes Log section. Older requests can be viewed by going to WooCommerce > Status > Logs.

Even if the tax value for an order is 0.00, Automated Taxes may be working correctly.

If your store is based in, for instance, the United States, you only need to collect sales tax from customers in locations where you have a “tax nexus,” which typically means a physical presence. WooCommerce Shipping & Tax uses your store address (WooCommerce > Settings > General) as your “tax nexus”.

You can also have a tax nexus in another state if you exceed a certain yearly dollar value or order total to another state. If you are unsure of your tax nexus status, please consult a certified local accountant.

If you need to charge tax for any other state, you can add a tax rate for that state in addition to using automated taxes to charge customers from that state tax as well. For more information about your States Tax Nexus and Destination Tax rules, please have a look at: State-by-state guide to economic nexus laws.

According to the Florida Department of Revenue, sales tax must be charged on shipping costs if the customer does not have an option to avoid paying the merchant for shipping costs by either picking up the merchandise themselves or arranging for a third party to pick up the merchandise and deliver it to them.

For merchants with Store Address (WooCommerce > Settings > General) set to Florida, we have enabled shipping tax for Florida by default since 1.26.0. If you would like to disable it, you can do so via a filter: add_filter('woocommerce_taxjar_enable_florida_shipping_tax', '__return_false');

If for some reason you need to change your store address to another state, it is important that you check the settings you are using.

WooCommerce Shipping & Tax uses your store address (WooCommerce > Settings > General), so it is important that you use this setting to add the new address where your store will be located. You will also need to delete all information that you added to the Standard tax rates (WooCommerce > Settings > Taxes > Standard rates tab). When using the automated rate rates, you’ll want to remove those standard rates to reset the plugin to your new location.

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Reset the connection to WordPress.com by following this guide from our WooPayments documentation as the process is the same.

We connect to your WordPress.com account to authenticate your site and user account so we can securely charge the payment method on file for any labels purchased. You can read our Terms of Service here.

On April 1st, 2019, WooCommerce Tax returned lower-than-expected sales tax rates for select merchants in California and Texas. The issue was caused by a scheduled system update on our tax rate provider’s systems. They quickly identified and resolved the issue. However, some merchants based in California and Texas may have been affected.

The issue would have caused under-collection of sales tax of 1% or up to 6.5% in Texas and California, respectively.

To know if your transactions were affected, they would need to meet all of the following criteria:

Your store address is in California or Texas. You can check your store address in WooCommerce > Settings.Your store is using WooCommerce Tax. To check if the automated taxes feature is enabled look at the Automated taxes setting in WooCommerce > Settings > Tax. This tab is only visible if taxes are enabled.Your store had transactions during the affected time windows. To review your orders, go to WooCommerce > Reports and select the appropriate date range:

• In California, we returned a lower-than-expected state rate from midnight UTC (5 pm PDT on March 31st) until the issue was resolved at 1:25 PM UTC (2:25 am PDT on April 1st.)
• In Texas, we returned a lower-than-expected city rate from midnight UTC (7 pm CDT on March 31st) until the issue was resolved at 5:30 PM UTC (8:25 am PDT on April 1st.)

If your transactions were affected and your business uses the tax reports for reporting & filing, you likely need to manually correct the collection amount for those transactions before filing your sales tax returns. This Sales Tax Calculator could be a helpful tool.

As always, we recommend consulting with a tax professional or an accountant that can advise regarding any applicable laws to your state, country, or business. Each business is unique.

On July 1, 2021, new taxation rules will come into effect as part of the European Union (EU) Value-Added Tax (VAT) eCommerce package. When using WooCommerce Tax, the new changes will affect the following kinds of merchants:

• EU merchants offering cross-border eCommerce within the EU above the EUR 10,000.00 threshold
• Non-EU merchants selling into the EU and opting to collect the VAT during the checkout

Read more about it in the WooCommerce blog: New EU Tax Regulations: What OSS and IOSS Means for Your Store
Consult the European Commission: Modernizing VAT for cross-border eCommerce

As always, we recommend consulting with a tax professional to ensure your business is following regulations and best practice.

On January 24 2022, WooCommerce Tax started returning higher-than-expected sales tax for select merchants outside of California. The issue was caused by a misconfiguration on our end. Merchants situated outside of California that made sales to California customers have been affected, and started to collect tax for those customers.

To know if your store might be affected, you need to meet all the following criteria:

• Your store has WooCommerce Shipping & Tax installed and enabled (you can check this in the Plugins menu in your WordPress dashboard)
• Your store is situated outside of California (you can check this in WooCommerce > Settings > General, under the Country / State setting)
• Your store is enabled to sell to California (you can check this in WooCommerce > Settings > General, under the Selling location(s) setting)
• Your store has enabled taxes (you can check this in WooCommerce > Settings > General, under the Enable taxes checkbox)
• Your store is enabled to automatically calculate taxes at checkout (you can check this in WooCommerce > Settings > Tax under the Automated taxes setting)

To resolve the issue for future orders, you will have to:

1. Remove the incorrect tax rates that are stored on your store
2. Correct the collected amounts for transactions made to customers in California

We recommend following the two steps in the order above.

In WooCommerce Shipping & Tax version 1.25.23 there’s now a built in tool to automatically remove incorrect tax rates, which automates the steps below. This can found at WooCommerce > Status > Tools > Delete California tax rates.

Once that is run, you can proceed to the Correct the collected transaction amount steps.

• Go to WooCommerce > Tax and click Standard rates
• Select any rows with a State code of CA
  • You can hold the Shift or Alt key on your keyboard to select more than one row at a time
• Click Remove selected row(s) button at the bottom of the table
• Click the Save button on the page

• Go to WooCommerce > Orders
• Find the orders placed by customers in California. To help with this task you can:
  • View the billing and shipping addresses by tweaking the columns under Screen options
  • Filter orders by searching for CA
  • Filter orders placed between January 24, 2022 and the date where you removed the incorrect taxes
• For each order, follow the refund steps to refund the tax amounts (if any) for each sold item

Please note that the reports under Analytics > Taxes will be updated shortly after.