How taxes work in Magento 2 store and what tax configurations are available

Taxes have always been a complex question, and every business wants to automate calculations to make it easier for managers and enhance the shopping process for customers. A modern online endeavor based on the platform developed by Adobe can have rule-based tax calculation automation. The Magento system applies charge rules that rely upon the client, item classes, clients' transportation and charging addresses, store area.

A manager can set up multiple classes for items to segregate their taxes. This is based on item and client information, charge zones, and rates.

Inside the store, its admin interface proposes the following tax sections:

General Tax Settings

The accompanying guidelines of this page take a visitor through the essential settings for taxes that any eCommerce business can use. Before setting up these elements, a manager should ensure that they are aware of the assessment prerequisites in the specific area of the shop. Then, at this point, complete the configuration as indicated by those prerequisites.

Tax Rules

The rules for taxes include a mix of classes for items and clients and respective expense rates. Every client is assigned to a specific taxation class, and every item is allocated to the respective taxation class.

The system dissects every client's order and ascertains the proper assessment as per the client and item classes. It also considers the area, determined by the client's transportation address, charging, or delivery address.

Tax Classes

Classes for taxes can be allocated to clients, items, and transportation services. The system examines each customer's order and calculates the appropriate taxation depending on the customer's class and the goods ordered, as well as the customer's district. The latter is determined by the client's transportation, charging, or delivery address. New classes for taxation are allowed when the assessment rule is introduced.

Fixed Product Tax

Some local districts have a mandatory financial installment that should be added to specific items. Depending on the store's duty estimations, a manager can set up this charge as a fixed value (FPT). For instance, in certain nations, FPT may be used to set up a so-known WEEE tax, also familiar to many as ecological tax or eco tax. This type of financial payment is collected on certain electronics to offset the cost of recycling old electronic devices. This payment is a predefined sum rather than a certain part of the item cost.

Price Display Settings

This value shows whether an item and its transportation costs incorporate the amount of tax. It is quite possible to show two renditions of the value; one with and one without tax.

Tax Zones and Rates

Charge rates, by and large, apply to exchanges that occur inside a particular region. Using the Tax Zones and Rates option, the manager can indicate the rate for each geographic region from which taxation is collected and sent.

Since each such zone, not excluding its designated rate, has an identifier, a manager can have different rates for a given geographic region. For example, some regions omit taxation of food or medication.

Value Added Tax (VAT)

Some countries charge a value-added tax, or VAT, on goods and services. VAT rates may vary depending on the stage of production or distribution of the products, materials or services that you sell to your customers. In some cases, you might need to use more than one VAT rate in your store for tax calculation purposes.

Tax Quick Reference

There is a choice of options in some tax settings that determine how the tax is calculated and presented to the client.

Hidden tax conditions

Hidden Tax is the amount of VAT that a discount amount has. It will be non-zero when all of these conditions are true: Catalog prices include tax, VAT rate is not zero, the discount is present.

International Tax Guidelines

International tax rules apply to the income that companies earn from their overseas operations and sales. Tax treaties between countries determine which country collects tax revenues, and anti-avoidance rules are set to limit the opportunities companies take to minimize their global tax burden.

Vertex Cloud

Vertex is a cloud-based solution that automates your sales, uses tax compliance, and generates a signature-ready PDF for your monthly returns. You need a Vertex account to get started, then complete configuration settings.

The integration includes tax configuration and address cleansing for your stores, overrides per country, and performance-enhancing options.


A store owner receives great flexibility with Magento 2 in arranging taxes. Still, this task requires significant interaction, and it should be given a lot of attention, especially in eCommerce.

Different countries have different tax systems. Therefore, a store owner or manager should first devote his time to researching and being well aware of all the tax expense requirements in the countries in which the store operates. This should be done before setting up rules, rates or classes for taxes in Magento 2.

There are many excellent magento 2 extensions allowing full configuration and control of taxes to the benefits of any eCommerce.