For online sales, you need to collect taxes and forward the collected amounts to the tax authorities (for example, sales taxes in the US, VAT in Europe, GST in Canada, and more). If you have already set up sales taxes in Retail POS, you can duplicate those rates for your online store.

What taxes should I set up

Taxation rules differ depending on the country where the online business is based — tax rates can depend on types of products, your business location, consumers’ location, and more. For example, merchants that sell e-goods to customers in the EU, should charge taxes on digital products.

Check with your local tax experts whether you sell taxable goods and what are the tax rates associated with them before moving forward with online sales.

There are two ways to set up taxes in your eCom store to meet your local tax laws:

• Automatic taxes. They are available for merchants in the USA, Europe, UK, Canada, Australia, New Zealand, India, South Africa, Taiwan, Singapore, Malaysia, Indonesia, Saudi Arabia, Canary Islands, Melilla, and Ceuta. Automatic taxes provide up-to-date rates across the store and can be enabled in one button click.
• Manual taxes. If automatic taxes are not available for your country or your business requires a specifically tailored taxation scheme, you can configure taxes manually.

Setting up automatic taxes

To set up automatic taxes:

1. Navigate to the Online tab > Settings > General.
2. Scroll down to the Company address section and enter your legal company address. This address is needed to calculate and apply the right tax rate to orders at checkout.

   

3. Navigate to Online > Overview > Go to eCom (E-Series) to open the eCom admin.

4. In your eCom admin, go to Settings → Taxes and click Turn on near the Automated taxes.

Once enabled, automatic taxes will determine a precise tax rate at checkout depending on where you and your customer are located and will apply tax to each order.

By default, the same standard tax rate of your store’s region applies to all products. If some of your products are taxed differently (for example, they are tax-exempt), you can change the tax rate for those products in your eCom admin.

Setting up manual taxes

You can manually configure your online store to calculate tax rates for different regions, zones, and countries. You should set up taxes manually if automatic taxes are not available for your country or if you need a complex taxation scheme tailored to your business.

The instructions below use a 10% tax for a state to illustrate the setup process.

Step 1: Add a zone

Create a destination zone for the tax rate to apply. A destination zone, or a shipping region, is a geographical area that you ship to. With zones, you can define where you sell and how much you charge for delivering orders to various customer locations.

If the same tax rate applies to several different states, you can create one zone consisting of these states and set up a tax rate for this zone.

To add a zone for the tax:

1. Navigate to Online > Overview > Go to eCom (E-Series) to open the eCom admin.

   

2. In the left-hand menu, hover over Settings, then select Taxes.
3. In the Manual section, click Manage Tax Rates.
4. Click + Add New Tax and Save.
5. Click Manage zones (global) to open the Destination Zones page.

   

6. Click + Add New Zone.
7. Click Add State, Add Country, or Add Region and add the necessary state, country, or region.

   

8. Set a clear name for the zone. For example, States with a 10% tax rate. Tax zones and destination zones are displayed on the same Zones page, so make sure to include the word "taxes" in the name of your tax zone to avoid confusing it with another shipping zone you may create. Customers won't see the name you picked for the zone.
9. Click Save.

Step 2: Add a tax rate for the zone

1. Navigate to Online > Overview > Go to eCom (E-Series) to open the eCom admin.
2. In the left-hand menu, hover over Settings, then select Taxes. If automatic taxes are enabled, make sure to toggle it off.
3. In the Manual section, click Manage Tax Rates.
4. Click + Add New Tax.
5. Enter your tax name. For example, 10% Tax. Customers will see the name you picked for the tax at checkout.
6. If the tax applies to all products, check the Enabled by default for all products option.
7. Choose whether the tax applies only to the subtotal or the subtotal and shipping.
8. Choose whether a shipping or billing address defines the zone for a customer.
9. Click Specify rates per zone. Select the zone you created in Step 1 and enter the applicable tax rate.
10. Make sure the tax is enabled and save the changes.

If you have several taxes and/or zones, repeat the steps above for each one.

Assigning product-specific rates for automatic taxes

After you enable automatic taxes, the same standard tax rate of your store’s region applies to all the products. If some of your products require non-standard rates, you can change the tax rate for them.

To change tax rate for a product:

1. From your Retail POS, go to Online and click Go to eCom.
2. In your eCom admin, go to Catalog → Products.
3. Open the product.
4. Click the Taxes tab. You will see the tax rate that is currently applied to this item.

5. Click Change tax rate for this product:

   

6. From the dropdown, choose the tax rate that applies to your product.

   For the US merchants: You can use the search to find the rate you need.
7. Save the changes.

That’s it! Now, this product will be taxed according to the tax class that you chose.

Repeat the steps for all the products that should be taxed differently in your store.

Assigning product-specific rates for manual taxes

After you manually set up all the necessary taxes for the locations you sell to, you can choose which taxes to assign to certain products in your store. By default, all the taxes are applied to all the products.

To assign tax rates to a product:

1. From your Retail POS, go to Online and click Go to eCom.
2. In your eCom admin, go to Catalog → Products.
3. Open the product.
4. Click the Taxes tab. You will see the list of tax rates that are currently active in your store.

5. Enable the tax rates that apply to this product and disable those that do not apply. If it's a non-taxable product or service, disable all the tax rates:

   

6. Save the changes.

That’s it! Now, this product will be taxed according to the tax rates that you enabled for it.

Repeat the steps for all the products that should be taxed differently in your store.

Managing tax nexus locations

Optionally, if you're US-based and need to customize nexus rates for different locations:

1. Navigate to the Tax Nexus Locations page
2. Click the Manage Nexus dropdown or Edit Address in Lightspeed POS to edit locations where you have a tax nexus and you're collecting taxes.
3. Confirm your changes and click Save.

What's next?