Tax groups are used to setup how taxes behave in different scenarios. You should always consult someone with financial knowledge before doing any changes related to taxes.
When setting the prices of your products for B2C, you need to take the tax groups into account. Centra handles price in front end best when tax/VAT is included in your prices. If not, price will be listed with and without tax. This might be a desirable result, but in most cases it’s not.
Setting up Tax Groups
This is done under SYSTEM > TAX GROUPS
For this example, we’re using Sweden as country where products are being sold from.
In Sweden VAT is 25 percent. So when creating a tax group, we will set up a tax rule with In VAT and Out VAT at 25 percent. This will also be valid for all countries within EU.
However, if you want to sell and ship products to a country which is not within EU, you need to set up a tax group with In VAT at 25 percent (remember that we have the prices in Centra including VAT), and Out VAT at 0 percent. In this case the VAT will be deducted from the final price when the customer reaches the check out.
There might also be scenarios where products sold have a different VAT rate. Food in Sweden is an example for this, where the rate is 12 percent. You will in this case, have to setup another group where In VAT is at 12 percent and Out VAT is at 12 as well.
If products with different tax rates are sold in the same store, you’ll need to manually set the tax group on product level. There are some things to take into account here; are there less products with 12 percent VAT? If yes, set the Tax Group with 25 percent as default in your store, and the newly created Tax Group with 12 percent VAT should not be set as default. This means that all products, will be treated as a product sold with 25 percent VAT. Is it the other way around? Set the Tax Group with 12 percent VAT as the default one, and set the 25 percent tax group at the products which are sold with the higher rate.
To select a specific Tax group on a specific product, simply browse for the product you need to change, go to Retail attributes, click edit and select the Tax group you want to use and click Save.