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GLOSSARY

Tax category

A way of grouping the SKUs on the basis of the specific tax rate which is applied to them


It may be that the same tax rate doesn’t apply to every kind of goods and services. This is due to the fiscal rules of the country you’re selling in (and/or shipping from). Some items could benefit from a reduced tax rate and some other ones even be exempt or outside the scope of the current tax system. These particular rates may only apply if specific conditions apply:

  • the precise nature of the goods or services,
  • who are providing or buying them,
  • where they’re provided

Within Commerce Layer, you can configure a tax calculator, to have the total tax rate calculated for each order. If the order contains some products subject to specific taxation, you cant match them to particular tax categories. You’ll make your tax calculation more accurate.

While setting up your Commerce Layer’s Organization you can assign SKUs to a specific tax category. You just have to:

  • provide the code of the SKU itself
  • select the Tax Calculator you want to use,
  • select the tax category.

Otherwise - if no tax category is defined - the maximum tax rate applies to the final calculation.

Examples

As mentioned above, in most of the countries, the tax rate can change according to the specific kind of good or service. In turn, these lists of tax rates associated with particular categories of items vary with law updates and government’s notices. That’s why, in order to set up your tax categories properly, it’s highly recommended that you are constantly updated on this matter.

Find here below a couple of examples. They are not meant to be comprehensive and should not be taken as such.

UK

The standard VAT rate in the UK is set to 20%. Different tax rates apply to the following kind of goods and services.

  • Reduced rate (10%)
    Children’s car seats and domestic fuel or power, installation of energy-saving materials, mobility aids for senior citizens etc.
  • Zero rate (0%)
    Books and newspapers, children’s clothes and shoes, motorcycle helmets, most goods you export to non-EU countries etc.

Italy

In Italy, the standard VAT rate for most of the taxable goods and services is set to 22%. Anyway, some particular items can benefit from a reduced tax rate, down to zero.

  • 10%
    Some foodstuffs, water supplies, some pharmaceutical products, domestic passenger transport, admission to cultural and sports events, some social housing, renovation and repair of private residences, some agricultural supplies, hotel accommodation, restaurants, collection of domestic waste, alcoholic beverages in bars and cafes etc.
  • 5%
    Social and health services provided by social cooperatives.
  • 4%
    Some food products, certain medical equipment for disabled persons, certain books, newspapers and some periodicals, TV license, some motor vehicles, some supplies for new buildings etc.
  • 0%
    Supplies of land which cannot be used for building, intra-community and international transport.

USA

In the United States, sales tax is governed at a state level and no national general sales tax exists. Most of the US states impose general sales taxes that apply to most goods and some services. States also may levy selective sales taxes on the sale or lease of particular categories of items or services.

Let’s take New York state as an example. Within the state of NY, sales tax applies to retail sales of certain tangible personal property and services. Whether sales of a particular good or service are taxable may depend on many factors. As a general rule, sales of tangible personal property are subject sales tax (unless they are specifically exempt). On the contrary, sales of services are generally exempt from New York sales tax (unless they are specifically taxable).

  • Tangible personal property
    Some examples of taxable tangible personal property, services, and transactions that are subject to sales tax are computers, boats, and yachts, motor vehicles, candy and confections, bottled water, soda and beer, cosmetics, jewelry, food, and supplies for animals etc.
  • Services
    Some services subject only to NYC sales tax are barbering, tanning, manicure, and pedicure, massages, health salons, gymnasiums, Turkish and sauna baths etc.