Tax rates are a critical aspect of eCommerce, representing the percentage of a customer's purchase that must be paid as tax to the government. These rates can be assigned to individual products, groups of products, or entire orders to calculate the applicable taxes. In many countries, tax systems vary based on the destination of the order, meaning the tax rate applied depends on the region where the product is delivered.

Ivonto simplifies the process of creating and managing tax rates, enabling sellers to apply location-based tax rates. This ensures that customers are charged the correct tax amount for their orders, keeping your business compliant with local and national tax regulations. It’s important to note that while Ivonto helps in setting up these tax rates, it is not responsible for filing or submitting your sales taxes.

Understanding whether to include taxes in the product price is crucial and varies by country. In some regions, like Australia, Japan, and the European Union (EU), Value Added Tax (VAT) is typically included in the displayed price. Conversely, in places like the United States and Canada, taxes are usually added at checkout.

Ivonto allows sellers to display product prices with VAT included. To enable this feature, navigate to Settings → Taxes, and select the option to "Include tax in prices." This option provides transparency for customers by showing the final price, inclusive of taxes, right from the start.
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However, if you include taxes in prices, you may notice inconsistent price endings during checkout. Ivonto offers a price rounding feature to adjust the total sales amount to more standardized values, ensuring a seamless shopping experience.

The decision to include or exclude taxes in product prices depends on several factors, including regional tax regulations and the nature of your business. Below are examples illustrating different scenarios:

If your Ivonto store displays product prices without tax, customers will see the base price, and taxes will be added during checkout. For example, a customer in Denmark buying a product priced at €20 will pay an additional €5 in taxes (25%), making the total €25. Meanwhile, a customer in the US, where no EU taxes apply, will pay only €20.

If you include taxes in the product prices, both Danish and US customers will see the same price of €20. However, for the Danish customer, €4 of this amount is tax, while the US customer pays €20 entirely for the product, as no tax applies.

This approach simplifies the purchasing process by providing a final price upfront, which is beneficial when selling to consumers. It’s also compliant with regulations in countries that require tax-inclusive pricing.

In this scenario, prices adjust based on the customer's location. A Danish customer sees a price that includes €4 in taxes, while a US customer sees the price without tax. This method ensures compliance with local tax laws and offers flexibility in pricing.

For VAT exclusion, use the following formula: VAT = Gross Amount / (1 + VAT percentage). For example, if the VAT is 25%, divide the gross amount by 1.25 to calculate the VAT. You can also use online tools like vatcalconline.com to perform these calculations.

Follow these steps to set up a new tax rate in your Ivonto store:

Keep in mind that tax regulations vary, and some countries may or may not tax shipping. Ivonto allows you to customize these settings to align with your business needs.

Once your tax rates are set up, Ivonto automatically calculates the appropriate tax amount for each customer order based on their location and the tax rules you've defined. This ensures that your customers are charged the correct tax, and your business remains compliant with applicable tax laws.

​Note: If no tax rate is created, customers will not be able to complete the checkout process.

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