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Tax Options

In the United States, taxation of online sales is typically handled as follows:

  • orders submitted by customers that reside in the same state where the company managing the online store is located are taxed
  • orders submitted by out-of-state customers are not taxed (this includes international customers).

ProductCart also supports country-based taxation for international stores. Canadian stores can now display federal and local taxes separately (other stores in other countries that require this, can do so as well, of course). Independently of the tax settings configured using the Tax Option module, you can set a product or service as tax-exempt when adding or modifying a product.

The tax calculation features provided by ProductCart are designed to help you calculate sale taxes. However, the calculation performed by the software may or may not exactly match the tax laws that you need to comply with. You should consult your local tax authority to determine the tax laws that you need to adhere to.

ProductCart gives you the ability to either use a database file containing tax rates, or enter rates manually by location, product, and/or zone. All methods are described in more detail in this section of the User Guide.

Using a Tax Data File

This section applies mostly to US merchants, although you can use this feature of ProductCart outside of the US too if you can apply tax rates based on the customer’s postal code.

Overview

It is important to understand when you are required to collect sales tax in your Internet store, and for which states. Most online sellers collect tax only in the state(s) where they have a “nexus”, or physical presence. The definition of nexus varies from state to state, but can include employees, agents, telecommuters, premises, personal property, or even web servers. Check with your CPA or the state directly to determine if your company has a nexus in that state.

Accounting for multiple local sales tax levels

Sales tax can be at local levels beyond just the state rate. These local rates can include the county, city, special purpose district (SPD), and metropolitan transit area (MTA). Keeping track of these rates and rate changes is essential to ensure that you are charging the correct sales tax rate for your online transactions.

Early Impact recently partnered with Tax Data Systems to allow US-based users of ProductCart to quickly, easily and accurately calculate sales tax on orders placed on their store. If would like to use a tax data file to calculate taxes in ProductCart, but elect not to use Tax Data Systems’ services, you can manually create a tax data file. Please refer to Appendix O FIXME [check this reference–should add link] of this User Guide for details on the file format that you will need to adhere to. Tax Data Systems provides inexpensive subscription services to complete and updated data files that contain all the information that is needed to properly calculate sales taxes. The company sends regular updates to its customers to keep them up-to-date with the latest tax changes.

The benefits of using Tax Data Systems' data files with ProductCart

ProductCart v2.7 and above contain a sophisticated tax module that takes advantage of Tax Data Systems’ data files to allow your store to effectively perform the following tax-related tasks:

  • Properly calculate sales tax, based on the tax rate associated with the customer’s shipping address.
  • Correctly handle scenarios in which a ZIP code includes multiple city/county combinations and therefore multiple tax rates are associated with it. The customer will automatically be prompted to select the county/city combination that they reside in.
  • Automatically determine whether shipping charges should be added to the taxable total.
  • Automatically determine whether handling fees should be added to the taxable total.

Do you need a tax data file?

If your company has a physical presence in one or more US states, and if any of those states are listed in the table shown below, then local tax rates are used, and the answer to the question of whether you should use a tax data file is “yes”. If your state is not listed, then it means that either there is no sales tax in your state, or a uniform tax rate is applied across the state. Contact your local tax authority for more information on how sales taxes should be calculated in your state (and in all other states in which your company has a physical presence). Below is a list of the states that collect local taxes.

  • Alabama
  • Alaska
  • Arizona
  • Arkansas
  • California
  • Colorado
  • Florida
  • Georgia
  • Idaho
  • Illinois
  • Iowa
  • Kansas
  • Louisiana
  • Minnesota
  • Mississippi
  • Missouri
  • Nebraska
  • Nevada
  • New Mexico
  • New York
  • North Carolina
  • North Dakota
  • Ohio
  • Oklahoma
  • Pennsylvania
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas*
  • Utah
  • Virginia
  • Washington
  • Wisconsin
  • Wyoming

If you are shipping orders from Texas, you do NOT need a tax file as taxes are calculated based on the shipper's location (so only one tax rate is needed). If you are shipping orders to Texas from outside of Texas, and your company has a physical presence in Texas, then you need a tax file as taxes are calculated based on the customer's shipping address.

Obtaining a tax data file from Tax Data Systems

Once you have determined in which states your company has a physical presence and which of those states require the company to pay sales taxes, contact Tax Data Systems to purchase a subscription service to tax data files for those states. In most cases, you will probably need just one tax data file for the state in which your company resides.

★ As a ProductCart customer, you are eligible to a special discount on Tax Data Systems’ subscription services. For more information and to purchase one or more tax data files, please visit: http://www.earlyimpact.com/productcart/support/updates/taxlink.asp

Once you have obtained the data file from Tax Data Systems, you can return to ProductCart and finish setting up the tax settings. If you purchased more than one file, carefully review the next section.

Combining multiple data files

You can only use one data file at a time in ProductCart. This means that if you purchase two or more data files (two or more states) from Tax Data Systems (e.g. your company has an office in California and one in New York), you will need to combine them into one and upload the combined file to ProductCart.

Use the following procedure to combine two or more CSV files into one:

  • Open the first file with Microsoft Notepad
  • Select all data except the first row. The first row is the one that ends with “TAX_SHIPPING_AND_HANDLING_TOGETHER”. The second row starts with a ZIP code.
  • Select Edit/Copy.
  • Open the 2nd file with Microsoft Notepad.
  • Go to the very bottom of the file. Press the Enter key on your keyboard to create a new row, then place the mouse cursor then. This new row should be the very last row of the Notepad file. To ensure that this is the case, click the Delete key on your keyboard until this is the last row of the file.
  • Select Edit/Paste. The data copied from the first file will be pasted into the second file.
  • Select File/Save. Make sure to save the new file using the *.csv extension. For example, you could save this new file as mytaxFile.csv. Make sure the file name does not contain any spaces.
  • Proceed to the next section, which contains information on how to upload your tax data file to ProductCart.

Configuring ProductCart’s Tax Module

  1. Log into your ProductCart Control Panel and select Store Management Tools > Tax Options > View/Edit Tax Options. From the screen that is shown to you, select the option to use a tax file.
  2. Upload the data file received from Tax Data Systems to your store using the built-in upload feature. To do so, click on the text link Upload the file to your store, locate the file on your computer using the Browse button, then click on Upload.

    Your file will be automatically uploaded to the “productcart/pc/tax” folder on your Web server. If you receive an error during the upload procedure, it is likely that the “pc/tax” folder does not have “write” permissions. Please refer to Chapter 2 of this User Guide for information on how to properly set folder permissions for your ProductCart store. Of course, you can also upload the file to your server using an FTP program.

    If and when you receive an updated tax data file from Tax Data Systems, simply upload the file to your store. You will not need to change any of the other settings as the file will likely carry the same file name. If the file name has changed, make sure to enter the correct one as indicated in Step 2.

  3. Enter the name of the file that you just uploaded to the store in the corresponding input field. For example, the naming convention of the tax files is the state abbreviation underscore complete.csv (e.g. “CA_complete.csv”). Make sure to include the “.csv” extension when you enter the file name in the corresponding field. If you enter a name that does not match that of the file that you uploaded to the store, you will receive an error message during checkout.
  4. Select whether wholesale customers should be taxed or not on your store.
  5. Enter one or more default states and specify a tax rate for all of them. .. The default sales tax rate is the sales tax rate that will be used if a match for the customer’s shipping address is not found in your tax rate file (for example, the customer types an incorrect zip code or a new zip code is added by the State and your file has not been updated to reflect this). .. If your company resides in California and you only have a physical presence in California, then the tax data file that you uploaded to your store will likely only contain tax rates for California, and your default state is only California. If you collect sales taxes for more than one state, enter them as default states.
  6. Place an order in your storefront to ensure that taxes are properly calculated. ProductCart will look at the ZIP code of the customer’s shipping address match it to a tax rate in the data file that you have uploaded. If there is no match, and if the state entered for the shipping address is not one of the default states listed in the tax settings, ProductCart will assume that the order does not need to be taxed. If there is more than one match, ProductCart will prompt the user to select the city/county in which they live in.

As long as the file is properly formatted, ProductCart will automatically determine whether shipping charges and/or handling fees should be part of the taxable total.

The shipping address specified for the order is always used to determine sales taxes to be applied to the order, if any. The shipping address is the customer’s billing address unless the customer specifies a separate Ship To address during checkout.

Once you have setup the tax calculation to use a database, ProductCart shows you a summary of such settings every time you click on View/Edit Tax Options from the Tax Options menu, as demonstrated in the screenshot above. From that screen you can either keep the tax settings 'as is', edit them (e.g. change the default tax rate), or switch to alternative ways to compute taxes, which are described in the next sections.

If you are receiving an error when placing a test order, and the error occurs during the checkout process, after the shipping selection page and before the order verification page are shown, and/or the error details shown by your browser include the file name tax.asp, please check on the following before contacting us for technical support:

  • Make sure that you have uploaded a tax data file to the pc/tax folder.
  • Make sure the file has a “.csv” extension (e.g. myTaxFile.csv).
  • Make sure that the file name specified in the Tax Settings area of the Control Panel matches the name of the file uploaded to the pc/tax folder. Also confirm that the file name does not contain any spaces or special characters. If it does, change the file both in the folder itself using an FTP program, and in the Control Panel.
  • If you combined two or more files together, review the instructions listed earlier in this section. Specifically, make sure that you did NOT include the header of the first file when you copied it into the second file.

If your problem is not solved by one of the items listed above, please note:

  • If are having an issue with the tax data file itself, please contact Tax Data Systems.
  • If you are having problems configuring your tax settings within ProductCart, please first review the corresponding chapter in the ProductCart User Guide FIXME [add link]. If you don’t find an answer there, visit the ProductCart Support Center for more information, to search an updated knowledge base, and to submit a support request.
  • If you purchased ProductCart from an Early Impact reseller, please contact the reseller for technical support as they may have made modifications to ProductCart for you.

Manually Adding a Tax Rate

Overview

When you cannot or do not want to use a tax database to calculate taxes on your orders, ProductCart allows you to manually enter tax rates and charge taxes based on the customer’s location (but not necessarily his or her postal code), products, or a specified geographic zone.

Manually adding tax by zone is the newest and most flexible way to apply taxes to your store. Originally designed with Canadian taxes in mind, this method has been used in many different creative ways such as adding on surcharges to certain products and/or categories.

To enter tax rates by product, location, or zone, click on Enter tax rates manually on the Tax Options window. If you are using a Tax Database, click on Switch to Manual Tax Calculation. Next, configure the following settings:

  • Include shipping charges. You can include shipping charges and/or handling fees in the calculation. As mentioned above, typically shipping charges are excluded, but handling fees are taxable.
  • Include handling fees. See above.
  • Base the calculation on the billing vs. shipping address. Typically, the shipping address is the one that should determine which tax rate should be applied, if any.
  • Display taxes separately. Since you have the ability to enter more then one tax rule, now ProductCart gives the option to display those taxes separately to the customer. For example, Canadian customers can use this feature to separately display federal and province tax.

When you are done, click on the Update & Continue button.

The next screen asks you to choose whether you would like to add a tax rule based on product, location, and/or zone, and it also provides a link to view existing tax rules. Let’s review the different options.

Add tax by location

To add a tax rule that applies taxes to an order based on the location where the customer resides:

  1. Click on Add tax by location
  2. Set the tax rate (to add a 6.5% tax rate, simply enter 6.5)
  3. Define the geographic limitation by selecting a postal code, a US state or a country.

You can have multiple tax rates working at the same time. Use the description field to enter a label for this tax (useful when taxes are displayed separately).


For example, a Canadian store would enter the following to add the Federal portion of the tax:

  • Rate: 7%
  • Description: GST
  • Country: Canada

The store would repeat the same step multiple times to assign local taxes to the various provinces (PST). FIXME [this example is not clear enough. the abbreviations should be spelled out.] The screenshot below displays how the Canadian store example would look.

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Using another Canadian example, the following screenshot indicates how the order verification page (pc/orderVerify.asp) displays tax details to customers when the store has been setup to show taxes separately. In this case, a Canadian customer from the province of Ontario is charged both federal and local taxes (GST and PST respectively).

  • Add tax by product. To add a tax rule that applies taxes to an order based on the shopping cart content, (1) click on Add tax by product, (2) select a product from the drop-down menu, (3) set the tax rate (to add a 6.5% tax rate, simply enter 6.5 ), and (4) define a geographic limitation by selecting a postal code, a US state or a country. You can have multiple tax rates working at the same time, so that you may cover all products that fall into a certain product category, for example.

ProductCart does not apply the tax by location on a product for which a tax by product has been entered, thus avoiding double taxation. In other words, when the shopping cart contains a combination of products for which a tax has been specified, and products for which it has not, ProductCart first applies the tax by product, then applies the tax by location (if any) on the rest of the products, unless they are tax-exempt. The tax added to the order is the sum of all taxes calculated on the shopping cart content.

  • List all tax rules. To display a list of all tax rules currently active in your store, select List all tax rules. To modify any of them, click on the Modify button. To delete a tax rule, click on the Delete button. To add a new tax rule, click on Add New.

The bottom part of the window allows you to reset the general rules described at the beginning of this section. To update these options, click on the Update button.

To switch to calculating taxes using a tax file, click on Switch to Tax file. To switch to using VAT, click on Switch to VAT.

Calculating the Value Added Tax (VAT)

ProductCart v2.7 and above allow you to show your customers the VAT (Value Added Tax) on the products that they are purchasing (product details page) and on the order total (order details page). The system behaves based on the following assumptions: • When you enter prices in ProductCart, they are always entered VAT included. When you add a product to your store, the product's price includes VAT. The system gives you the option to show the price without VAT on the product details page. • The same VAT is applied to all products sold on the store. You can configure the following settings: • VAT Rate (e.g. 20%) • Whether VAT should be shown on the product details page. If set to “Yes”, ProductCart calculates the price without VAT and displays it below the online price. Here is an example of how the price would be shown for a hypothetical product: Price: £26.00 Price inc. VAT Price without VAT: £21.76 List Price: £29.96 - You Save: £3.96 • Whether to include shipping charges in the calculation. If set to “Yes”, ProductCart assumes that shipping charges include VAT. So when it calculates the total VAT applied to the order, it includes these charges in the equation. • Whether to include handling fees. If set to “Yes”, ProductCart assumes that handling fees include VAT. So when it calculates the total VAT applied to the order, it includes these fees in the equation. • Whether wholesale customers should be taxed. You can choose whether or not VAT should be shown when wholesale customers are checking out.

Setting a Product as Tax-Exempt In many countries there are products and services on which taxes are not applied. In the United States, for example, you are not required to charge taxes if you are selling services (e.g. a legal consultation, graphic design services, etc.). You are also typically not required to pay sales taxes on products that are delivered electronically to your customers, as long as no physical product (e.g. a CD, a manual, etc.) is shipped to the customer. ProductCart allows you to set individual products as tax-exempt. This way you can configure general tax settings for your store, and then exclude from them products and services on which taxes should not be calculated. You can set a product as non-taxable both when adding a new product and when modifying a product. In both cases, notice the Non-Taxable check box locate in the Other Settings section of the page. Check this option to make a product non-taxable, then save the product information to the database. If an order contains both taxable and non-taxable items, taxes will be calculated on the subtotal for the taxable products.


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