Tax zone assignment rules define how customers from a particular country are taxed. The rules are created depending on which tax zone assignment algorithm is chosen.
To define the tax zone assignment algorithm or configure its conditions:
- Go to System > Settings. In the Finance list, go to Taxation > Tax Zones and Tax Categories. Switch to the Tax Zone Assignment Rules tab.
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Сlick Edit Algorithm Settings. For Tax zone assignment algorithm, choose one of these values:
Important: To avoid business disruptions for your resellers, make sure that your resellers ensure their preferred tax zone assignment rules. When a reseller is initialized in the system, and your chosen Tax zone assignment algorithm option is EU VAT algorithm or Same Country/State algorithm, your tax zone assignment rules will be automatically synchronized to them. This means that, for example, if you use Vertex O Series or EZTax or another third-party tax service, the newly initialized reseller will not be able to do business without either signing a contract with that tax service or manually changing their taxation configuration. If you use the Default option during reseller initialization, your resellers will not be subject to such risks.
- Default: This tax calculation algorithm means that there will be no tax zone assigned to customers if no special tax zone assignment rule is configured.
- EU VAT algorithm: This tax calculation algorithm is to be configured if provider's country is a member of country union.
- Same Country/State algorithm: This tax calculation algorithm is to be configured if provider's country has different taxation system for each country region.
Click Next.
- For EU VAT algorithm, review the settings (uneditable) and click Finish.
- For Same Country/State algorithm, specify how tax zones will be assigned to customers depending on their location relative to your location:
- From the Same Region Tax Zone list, select a tax zone a customer will get if they are from the provider's state/province.
- From the Same Country Tax Zone list, select a tax zone a customer will get if they are from the provider's country.
- From the Other Countries Tax Zone list, select a tax zone a customer will get if they are from another country.
Click Finish.