You can create tax rules for the countries, states, provinces, and United States ZIP Codes where you ship products. This guide covers how to manually enter your store's tax rules.
For help with VAT, GST, and tax-inclusive pricing, visit Collecting VAT or GST.
Note: This guide is available as a resource, but should not be construed or relied upon in any way as legal or accounting advice. Per our Terms of Service, Squarespace doesn't provide advice or recommendations regarding laws applicable to your site or business. If you have questions about collecting taxes, you can consult with a tax advisor.
Before you begin
- You can use this helpful resource for checking US state sales laws.
- The customer's shipping address determines tax for physical product purchases.
- It's not possible to set different tax rules based on the product.
- The customer's billing address determines tax for digital and service product purchases, unless a physical product is purchased at the same time.
- Gift cards purchases aren't subject to tax.
Step 1 - Add country tax rates
You can add tax rules for the countries/nations where you ship products. To do this:
- In the Home Menu, click Commerce, and then click Taxes.
- Click Add Country.
- Select a country from the Country drop-down menu.
- Type the tax name and tax rate for that country.
- If you're required to charge tax on shipping in this country, you can check Charge Tax on Shipping.
- If you're required to charge tax on service products, you can check Charge Tax on Services.
- Click Save to publish your changes.
Step 2 - Add state or province tax rules (United States and Canada)
If you're creating tax rules for the United States or Canada, you can add state or province tax rules:
- Hover over the country and click add state or add province.
- Choose the State or Province from the drop-down menu.
- Enter the sales tax rate.
- Click Save.
Step 3 - Add local tax rules (United States)
Local tax rules can apply to a single ZIP Code or a range of ZIP Codes in one state, so you can set tax rules compliant with various tax laws within one area. To do this:
- Hover over the state you added and click add local.
- Click Single ZIP Code or Range of ZIP Codes, and follow the next steps.
State and local tax rules combine. For example, if you charge customers in New York State 10% sales tax and charge customers in New York City 8% sales tax, customers in New York City will pay 18% sales tax. To create tax rules for states with variable local rates, create multiple local tax rules instead of a single, state tax rule.
Single ZIP Code
To add a tax rule for a single ZIP Code:
- Click Single ZIP Code.
- Add the ZIP Code and tax rate.
- Click Save.
Range of ZIP Codes
To add tax rules for a region/range of ZIP Codes:
- Click Range of ZIP Codes.
- Add the start and end ZIP Codes and the tax rate for that region.
- Click Save.
Edit a tax rule
You can edit or remove a tax rule by clicking the rule in the Taxes panel.
- Removing a country tax rule removes all state and local tax rules that apply to it.
- Removing a state tax rule removes all local tax rules for the state.
Tax-inclusive pricing (optional)
With tax-inclusive pricing, customers pay a product's listed price at checkout, instead of paying the listed price plus sales tax. The portion of the total that goes toward sales tax depends on the customer's location and is calculated at checkout.
To enable this:
- In the Home Menu, click Commerce.
- Click Taxes.
- Check Tax is Included in Product Prices.
Tip: You can customize invoices to change how tax and pricing displays.
How taxes are calculated and shown in an order
After setting up your rules, the tax applied to an order will display at checkout after a customer enters their address. The tax is based on:
- The shipping address for physical product purchases
- The billing address for digital and service products, unless a physical product is purchased at the same time
If a customer uses a discount, tax is calculated based on the discounted price. If multiple taxes apply (for example, a state and local tax) both taxes will be charged but won't compound.
Understanding South Dakota v. Wayfair, Inc.
In the US, an out-of-state seller is required to collect tax on remote sales made to customers in-state if the seller’s activity creates sales tax nexus with the state. Historically, nexus meant having a temporary or permanent physical presence in the state based on long-standing definitions.
On June 21, 2018, as part of its decision in South Dakota v. Wayfair, Inc., the US Supreme Court overturned some of its previous decisions and determined that out-of-state sellers may create sales tax nexus without a physical presence in-state. Sales tax nexus without in-state physical presence is referred to as economic sales tax nexus.
Numerous states responded to the Supreme Court’s decision by passing new legislation or reasserting existing economic sales tax nexus laws. How a seller creates sales tax nexus varies depending on each state’s laws.
If you’re selling products or services online, we recommend you speak with a tax advisor to evaluate your sales tax collection obligations in light of these new laws. The Internal Revenue Service provides a list of state websites for more information on each state’s sales tax laws.