How do I configure tax settings in Magento?

Configuring tax settings in Magento involves setting up tax zones and rates, creating tax rules, and configuring display and calculation settings. Here's a comprehensive guide to help you set up and manage your tax settings in Magento:

Step-by-Step Guide to Configure Tax Settings in Magento

Step 1: Set Up Tax Zones and Rates

  1. Log in to the Admin Panel:

    • Go to your Magento admin URL and log in.
  2. Navigate to Tax Zones and Rates:

    • Go to Stores > Taxes > Tax Zones and Rates.
  3. Add New Tax Rate:

    • Click on Add New Tax Rate.
    • Fill in the details:
      • Tax Identifier: Enter a name for the tax rate (e.g., US-CA-Rate).
      • Zip/Post Code: Enter the zip or postal code for the tax rate. Use an asterisk (*) for all codes.
      • State: Select the state for the tax rate.
      • Country: Select the country for the tax rate.
      • Rate Percent: Enter the tax rate percentage (e.g., 8.25 for 8.25%).
    • Click Save.
  4. Repeat for Each Tax Rate:

    • Repeat the above steps to create tax rates for each region where you need to collect taxes.

Step 2: Create Tax Rules

  1. Navigate to Tax Rules:

    • Go to Stores > Taxes > Tax Rules.
  2. Add New Tax Rule:

    • Click on Add New Tax Rule.
    • Fill in the details:
      • Name: Enter a name for the tax rule (e.g., Standard Tax).
      • Customer Tax Class: Select the customer tax classes to which this rule applies (e.g., Retail Customer).
      • Product Tax Class: Select the product tax classes to which this rule applies (e.g., Taxable Goods).
      • Tax Rate: Select the tax rates that apply to this rule.
      • Priority: Set the priority for this rule if multiple rules apply.
      • Sort Order: Enter a sort order number to determine the position of this rule in the list.
    • Click Save.
  3. Repeat for Each Tax Rule:

    • Repeat the above steps to create additional tax rules as needed.

Step 3: Configure Tax Calculation Settings

  1. Navigate to Tax Settings:

    • Go to Stores > Settings > Configuration.
    • In the Sales section, select Tax.
  2. Configure Calculation Settings:

    • Tax Class for Shipping: Select the tax class for shipping.
    • Catalog Prices: Select whether catalog prices are entered with tax or without tax.
    • Shipping Prices: Select whether shipping prices are entered with tax or without tax.
    • Apply Customer Tax: Choose whether to apply tax based on the shipping address, billing address, or origin.
    • Apply Discount on Prices: Choose whether to apply discounts on prices including tax or excluding tax.
    • Apply Tax On: Choose whether to apply tax before or after the discount is applied.
    • Enable Cross Border Trade: Enable or disable cross-border trade functionality.
    • Click Save Config.

Step 4: Configure Tax Display Settings

  1. Navigate to Display Settings:

    • Under the Tax section in Configuration, expand the Calculation Settings and Shopping Cart Display Settings, Orders, Invoices, Credit Memos Display Settings, and Fixed Product Taxes Display Settings sections.
  2. Configure Display Settings:

    • Display Product Prices In Catalog: Choose how to display product prices (including or excluding tax).
    • Display Shipping Prices: Choose how to display shipping prices (including or excluding tax).
    • Include Tax in Order Review: Choose whether to include tax in the order review.
    • Display Full Tax Summary: Choose whether to display a full tax summary in the shopping cart and during checkout.
    • Display Zero Tax Subtotal: Choose whether to display the subtotal when tax is zero.
  3. Save Configuration:

    • Click Save Config to apply the changes.

Additional Tips

  • Tax Classes:

    • Ensure that you have appropriate tax classes set up for your products and customers. You can manage tax classes under Stores > Taxes > Tax Classes.
  • Verify Configuration:

    • Test your tax settings by placing test orders to ensure that taxes are calculated and displayed correctly.
  • Stay Updated:

    • Keep your tax rates updated to comply with local tax regulations. Magento allows you to import tax rates if you have many to update.


By following these steps, you can configure the tax settings in Magento to accurately calculate and display taxes for your products and services. Proper tax configuration ensures compliance with tax laws and improves the customer experience by providing clear tax information during the purchasing process.