¶ Overview
The Tax Method system in Freedom is responsible for routing all taxes to the area for taxation calculation. As an example, you may have a tax configuration for one country to calculate a static 5% tax on all Products and Services. A secondary country may then have a configuration set to use Avalara for all tax calculations.
In a way, the Tax Methods page is the Air Traffic Controller for all tax calculation inside Freedom. While it may not be aware of the tax rates required to be charged, it's responsible for making sure the order's data makes it to the right place for calculation.
Tax Methods can be manually set inside Freedom by users with appropriate access, or 3rd Party Integrations can be leveraged for a more hands-off experience in calculation.
¶ Taxes
Taxes are calculated whenever an item is added to an online order in the shopping cart/party module or to an order in the back office.
If you only need to calculate taxes on just a state level, you can use Simple Taxes.
If you need to calculate taxes based on zipcode or at a city level, then you would need to use Simple Extended Taxes.
When calculating tax on an order, the system must first determine the method of tax calculation. Freedom supports 3 built-in tax calculation methods that implement user-defined rates as well as 3rd party rate services. The tax methods used on an order are determined from the tax methods table for each tax code on the order from its shipping jurisdication. It is possible, and supported, for an order to use multiple tax methods across item and shipping tax codes, but it is not supported to use different tax methods for the items of the same tax code in a given order.
¶ Tax Method Behaviors
- With the exception of the Avalara and TaxJar tax integrations, only first prioritized applicable tax method will be used to calculate taxes. When configuring taxes, it is best to assume that Freedom will not default to any particular tax method if there is no match for the item being evaluated. In these cases a rate of 0% would be used.
- If the system cannot identify a desired tax method, the system will default to looking up the rates through the Simplified Tax Method.
- When using Avalara or TaxJar, the systsem can use a backup tax rate in the event of a network error when retrieving the rate remotely. Freedom does not localy store/house the rates from TaxJar and Avalara. All of the tax calculations through TaxJar and Avalara are made through the 3rd-party.
- VAT Taxes require specific inventory configurations be country and Tax Code as the Tax charged is assumed to be applied to the items prior to purchase.
¶ Built-In Tax Methods with User Defined Tax Rates
- Simplified Taxes - Uses a single tax rate per tax category by state or country.
- Simplified Extended - Provides jurisdictional taxes for country, state, county, and city with variable jurisditictional levels by tax category.
- VAT Percentage - Provides a country level VAT Tax Percentage by Tax Category.
¶ Third-Party Tax Integrations
If leveraging any of the following Third-Party Integrations, the Integration Provider Account must first be configured. The exception to this is CCH Plus 4, where monthly subscription confirmations must be provided to ByDesign to update the stored tax rates and confirm access to the service.
- Sales Tax DataLINK - Provides Jurisdicitonal retail tax based on geographic jurisdictions defined by the 5-digit zip code and the 4-digit mail carrier route (zip +4).
- Sales Tax DataLink - Provides Jurisdictional Rates for specific supported tax categories defined by either the address or zip code.
- Avalara - Provides Jurisdictional taxes based on an assessed address for a wide range of configurable tax categories.
- TaxJar - Provides Jurisdictional taxes based on an assessed address for a wide range of configurable tax categories.
¶ Tax Methods Configuration
An Example of the Tax Methods page:
Tax Methods route tax calculation to the appropriate services. This is achieved by leveraging with the following:
- Priority: A higher priority that meets all other criteria (country, Tax Code, etc) will be used for calculations. Typically if you have granular matches, such as a specific State that does not charge tax, you may have a record for the state of Florida as a higher priority than the record for the country of USA for any given Tax Code.
- Country: In order for the associated
Tax Typeto be used, the Country of the order must match. - Additional Address fields (State, City, etc): These allow for more granular matches to be created.
- Tax Code: This is how Inventory/Products are able to route to different calculation methods or rates. All Products must have a
Tax Codeassociated with them, and by using that value, Freedom is able to calculate differing tax rates for each.
¶ Configuration
Prior to configuring the Tax Methods, it is highly recommended that you have all of the Tax Codes in place.
Navigate to the Tax Methods page by the following:
Departments → Administration → Settings → Taxes → Tax Methods
Tax Methods controls in which order the tax methods are evaluated.
The Tax Methods are evaluated in the order of their priority with the highest being evaluated first. The list will be in the order of evaluation from top to bottom. When evaluating which tax to use, the system will start at the top and go down the list of methods until it finds a match for the item being evaluated.
¶ Additional Information:
For additional information about taxes, see the following:
Simplified Taxes
Simple Extended Taxes
Configuring Taxes