As a merchant, you may need to charge and collect tax from your customers and remit those taxes to the government. While understanding tax laws and regulations can be complicated, ReCharge has made it easy for you to collect taxes on each order.
This guide provides instructions on how to begin charging taxes in ReCharge, as well as how to adjust tax settings.
Before you start
- You should always consult with a local tax expert to ensure that you are charging customers the correct sales tax.
- While ReCharge makes it possible for you to collect taxes from your customers by charging taxes on each order, we do not remit your sales tax for you.
Enable taxes in ReCharge
To enable taxes in ReCharge:
- In the ReCharge Dashboard, click the wrench icon and select Taxes.
- Select Charge sales tax in the Charge tax section.
General tax settings
With Tax details, you can specify your tax rules and how they should be applied.
Include shipping rate in taxed prices
If enabled, ReCharge will apply the tax rate to the cost of shipping in addition to the total order price.
Include all taxes in prices
If enabled, ReCharge will not apply additional tax to the total order price. Instead, the system will apply a formula to the total price and report the amount that should be considered taxable.
The formula that is used:
tax = (tax rate * price) / (1 + tax rate).
For example, a customer purchases a product that is £1.00 at 20%, the VAT will be £0.17 (rounded). The customer will be charged £1.00 and your store will be responsible for remitting £0.17 when reporting their taxes.
Run a check to see if all products are taxable
When enabled, ReCharge will query Shopify for the tax settings on individual products to see if tax should be applied. If this setting is not checked, ReCharge will apply taxes to all products in ReCharge.
Charging tax in the US
If your business has a physical or economical connection with any state in the US, you likely need to charge sales tax. Visit our guide to charging taxes in the US for specifics on setting up your US tax rates.
Charging tax outside the US
To learn more about how taxes are calculated for orders originating outside of the United States, visit our guide to charging taxes outside of the US.
Update tax settings
When you adjust your tax settings in ReCharge, it will affect all existing customers and the new tax rate or settings will be used for the next order. If tax settings are only changed in Shopify, it will not impact subscription customers in ReCharge.
Please contact our support team if you update or add additional tax rates in Shopify so that we can resync these rates.
Tax exemptions and overrides
While Shopify's tax overrides do not work with ReCharge, you can set certain products and customers as tax-exempt to prevent taxes from being charged on an individual level.
Our article on tax exemptions and overrides goes into setting tax exemptions up in detail.
For more robust tax settings that include automated tax calculates and tax fillings, you may want to consider using the third-party app Avalara.
Avalara is a sales tax software that provides real-time rates based on tax jurisdictions, not ZIP codes. This allows for better accuracy when calculating tax rates.
Visit the Avalara guide to learn more about this feature.