Compound taxes are "taxes on a tax" that are applied in a particular order that you specify on the Taxes page in the Back Office.
In certain states and regions, you need to configure two different types of taxes in Greenbits:
- Standard Tax is applied to the pre-tax price of the item. It does not include – and is not influenced by – any other taxes. This is the type of sales tax that most of us are familiar with.
- Compound Taxes are applied in a particular order. The first compound tax is calculated based on the pre-tax price of the item. The second compound tax is calculated based on the sum of the pre-tax price plus the first compound tax. Standard Taxes are not included in these calculations.
Check out this example, where compound taxes are compared to standard taxes, so you'll understand the difference.
Configure Standard Taxes
- On the Taxes page in Back Office, select + Add Tax.
- Name the tax.
- Select Standard Tax.
- Select the Product Types and Customer Groups that this tax should apply to.
- Enter the tax rate as a percentage.
- Specify whether this tax should be Inclusive or Exclusive.
- If you select Exclusive, select whether you want to apply this tax to the Discounted or Undiscounted price. We strongly recommend selecting Undiscounted.
- If you selected Inclusive, the tax must be applied to the Discounted price.
- For Start Date, select the current date if you want this tax to take effect immediately. Otherwise, select the date you want the tax to start.
- For End Date, keep it at Never. If this tax changes in the future, you can edit the existing tax rate to keep your historic tax records.
- Scroll back up to the top and select Save.
Configure Compound Taxes
To add and configure compound taxes, repeat the steps to configure a standard tax, with the following exceptions:
- Indicate that this is a Compound tax, not a Standard tax.
- Select No (Exclusive Tax) and Undiscounted.
- Important: Make sure your compound taxes are listed in the order they should be applied on the Taxes page. To change the order, select and drag the taxes to the correct order.