Tax priority – How supposed to work?
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Hello,
I am not clear how the Tax priority function is supposed to work.
We have therefore for testing at the moment 2 ways of Tax setting, namely:
1) Both country code with no zipcode with rate of e.g. 19% and with a zip code on priority 1 with rate of 0% . The one with the zip code is above the one with only the country code.
Then the correct 0% rate of the zip code is taken when this matches with the shipping address zip code.
2) The country code with no zip code with rate 19% has priority 1 and with zip code with 0% rate has priority 2. This is automatically saved under the priority 1. Then the correct 0% rate of the zip code is NOT taken when the zip codes matches.According to the help in the link https://docs.woocommerce.com/document/setting-up-taxes-in-woocommerce/ by taking the second example shown under “Tax rate examples”, selecting a higher priority of 2 or more is the way it is supposed to work. So looking at the example the US country code with State code CA and a priority 2 for zipcode 90210 (NOTE: the zipcode has been put in the State code column which looks like an error in this example. It should have been put in the Postcode/ZIP column) results in selecting the local tax rate of 2% when this matches.
Therefore with our setting 2, a priority 2 for Postcode/ZIP should then also result in selecting the 0% rate of the zipcode when this matches. However this is now ignored and only selects the 19% rate of priority 1, the country code!
It seems that not the priority works here but which setting is above the other to be considered first per country code.This functionality of priority is important for us as we have a marketplace integration using this to calculate the tax exclusive price following the setting 2 logic. It selects the rates according to priority when matching resulting in 19 or 0%. However when using our setting 1 the integration selects the first priority 1 per country code ignoring then the other(s) resulting in 0%, which results in a incorrect exclusive price in most cases.
On the other hand when using setting 2 we have now a problem for other orders within WooCommerce which then select only priority 1 rates in sequence of position above the other and therefore igorning the 0% for Zipcodes.Therefore I need to know how this priority setting is supposed to work.
To me it does not make sense when it is supposed to work as it does now, namely according to setting 1. Then the whole priority function is actually not working at all!
From the example it looks like it should work according to setting 2. This makes sense as it selects a rate per country code and then by priority e.g. 2 or higher over a lower like 1. When this is the case then there is an error in the Tax function that needs to be fixed, When not then the integration logic needs to be fixed. Look forward to the definite reply.
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Hi again,
Thanks so much for sending over your tax settings.
In terms of setting up tax on WooCommerce, it’s pretty straightforward. WooCommerce will start elaborating taxes from the top of the table to the bottom.
Let’s get for example your tax settings for Germany:
Link to image: https://bit.ly/3ANG1LxThe way it’s now configured lets WooCommerce stop at the first row as DE covers all Germany, including the zip codes below.
So you should set it this way with general DE at the bottom:
Link to image: https://bit.ly/36qPzy5As per the priority, check this link in the documentation. Within the same State like California you can set another State code (90210) that will trigger a different local tax rate (2%) from the general State tax rate (7%).
Priority and compound are useful when national and local taxes are effective in a given country. For example, national tax can be 20% and in addition, a given state or even a city may apply an additional 2% tax, which has to be added for customers from that city. In such cases, priorities and compound are necessary to calculate taxes properly.
Hope this helps.
Hi again,
Therefore with our setting 2 like for country code DE, a priority 2 for Postcode/ZIP should then result in selecting the 0% rate of the zipcode when this matches without compounding the taxes.
Priority 2 for postcodes should be fine. The most important thing to remember is the default behavior from top to bottom in order for the postcodes tax rates to be triggered.
When, as you mentioned first, WooCommerce will start elaborating taxes from the top of the table to the bottom, what is then the remaining functionality of priority setting?
If you are entering multiple tax rates for a specific country, for example multiple VAT rates within the same country, then you need to prioritize them according to their relative importance. Hence, in the field for Priority you can enter the number for each tax rate. Here every tax rate is set with a different priority level and only one particular tax rate corresponds to a specific priority.
Link to image: https://bit.ly/3z0esgsThanks.
Hi there,
Thanks for getting back with your additional comments.
Than as you mentioned, entering multiple tax rates for a specific country, for example multiple VAT rates within the same country, you need to prioritize them according to their relative importance. Hence, in the field for Priority you can enter the number for each tax rate. In the example every tax rate is set with a different priority level and only one particular tax rate corresponds to a specific priority.
Is this then the use of priority?This is absolutely correct. Priority is used for these cases where for example there are multiple tax rates for a specific country (E.g. 0% rate for DE, 14% rate for DE, 19% rate for DE). This can also be applied for postcode if there are different tax rates to be applied for that same postcode. Priority 1 is the highest while priority 2, 3, 4, etc. is the lowest.
Depending on your reply what should then be our setup for the system to select only the tax rate on postcode when matching e.g. 0% and when not matching on country level e.g for DE 19% without compounding these?
You have to list the postcodes on top and general DE on the bottom. When a specific postcode is entered in the Checkout then WooCommerce will start searching from the top and will select the tax rate assigned to that specific postcode. So that there can be no margin for errors. If the postcode entered in Checkout is not listed in the tax settings then WooCommerce will go down in the list until the general DE tax rate is found and will apply that specific tax rate.
I’d advise doing some tests on a local installation of WordPress and WooCommerce or in a remote staging environment if your hosting allows it and placing test orders. Oftentimes, to understand the behavior is far more convenient testing rather than trying to follow the theory that it could result complicated but in fact it is not.
Thanks.
Hi @compendiumvent1,
When setting up tax rates in WooCommerce, it is important to keep in mind that only 1 matching rate per priority will be used. To define multiple tax rates for a single area you need to specify a different priority per rate.
The proper use case for tax priorities within WooCommerce is a situation where you want to apply multiple taxes to an order.
Let’s take a look at this example where I’ve specified 3 tax rates as follows:
- 20% Federal Tax for all of the US
- 10% State Tax for the state of California
- 5% Local Tax for the 90210 zip code in Beverly Hills, California
Full Size: https://d.pr/i/gjpDorBecause I have assigned different priorities to each of these tax rates, here’s what will happen when a customer places an order on the store:
- If they are within the US, but not in California, they will always be charged the 20% Federal Tax
Full Size: https://d.pr/i/OwoK6w - If they are within the state of California, but not in the 90210 zip code, they will be charged both the 20% Federal Tax and the 10% State Tax
Full Size: https://d.pr/i/M3lN46 - If they are in the 90210 zip code of California, they will be hit with all 3 tax charges
Full Size: https://d.pr/i/oaeY32
The number you enter for the priority isn’t really relevant beyond the fact that if you have multiple taxes with the same priority, only one of them will apply.
If I change the priority of all 3 taxes to 1, then the results above would be different.
The customer would only get charged the Federal Tax in the first example. In the second example, since they are in California but not in the 90210 zip code, they would only get charged the State Tax. In the third example where they are in the 90210 zip code of California, they would only get charged the Local Tax.
I hope this helps provide some clarity around how priorities work with taxes.
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