Defining Tax Zone Assignment Rules Depending on the Country Taxation Rules

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:

  1. Go to System > Settings. In the Finance list, go to Taxation > Tax Zones and Tax Categories. Switch to the Tax Zone Assignment Rules tab.
  2. 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.

  3. For EU VAT algorithm, review the settings (uneditable) and click Finish.
  4. 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.

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