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Taxes

As a business owner, you are obligated to charge Sales Tax, VAT or GST. These are indirect taxes that are added on top of the product price, and which your customers pay during checkout. Your company collects these taxes and deposits them to your government's tax agency.

If you are just starting your business, consulting with an accountant or another professional is the best first step before starting an online store. They will help you with setting up your company and configuring Reflow so that you collect the right taxes and amounts.

If you are a seasoned business owner, you will probably be able to setup Reflow's tax configuration yourself. This page will explain how to do it.

Note

This documentation applies only to taxes for orders with one-time purchases.
For subscriptions, visit the subscriptions setup docs.

Quick Notes​

  • Reflow will match the customer's shipping address to your tax configuration. If no matches are found, no taxes are charged.
  • If you are obligated to collect a specific tax, but would prefer not to, you can configure your shipping methods so that your products can't be bought in the respective country/state.
  • At the moment Reflow's tax configuration is static, meaning that if there are changes to a tax, you will need to update your configuration by hand. We will be developing integrations with tax calculation services like TaxJar in the future.

United States​

You should collect US sales tax if:

  • Your business is based in the USA
  • Your business is outside the USA but sees a large volume of sales to US customers (registration thresholds vary by US state, it's best to consult with a tax professional for more info)

USA sales tax is infamous for its complexity, with over ten thousand possible tax rate combinations. A consultation with an accountant or a tax professional can help you determine which states you should collect taxes in, and in what amounts.

Configuration​

In Reflow, US Sales Tax is configured by uploading a CSV file with rates. Here are some examples (basic, zip ranges, multiple jurisdictions). Some notes:

  • Each line in the CSV describes the rates that apply for a specific Zip code. Standard zip codes and zip+4 codes are supported, as well as ranges and * (wildcards which match all of the zips in a state).
  • Zip codes are matched against the customer's shipping address, from the most to the least specific (direct matches are tried first, after this prefixes of the first 3 digits, then ranges and lastly wildcards).
  • You can enter up to 4 jurisdictions for each line. As an example these can be state, city, county and district. Each rate is described by 3 columns - taxN_name (visible by users in their shopping cart), taxN_rate (tax in percent) and taxN_juris (a label which our system uses in order to group/sum sales in your reports).
  • The taxN_rate should have the tax as a percentage and not a decimal. For example, a rate of 19.50% is represented as 19.50 and not 0.1950.
  • If the user's shipping address doesn't match any of the zip codes, no tax is charged.

Additional Options​

  • Pricing Type - Inclusive or Exclusive. Inclusive pricing means that taxes are included in the price of your goods. Exclusive means that tax is added on top of the price during checkout. For example, a purchase of a $100 product under a 6% sales tax, will show a total cost of $100 under an Inclusive tax, and a $106 under Exclusive. If you allow tax exemptions and the customer is exempt, they will get to pay $94.34 under Inclusive tax and $100 under Exclusive.
  • Allow Tax Exemptions - This will allow your customers to upload a file (document, photo or pdf) which will exempt them from sales tax. Since it is not possible to validate these exemptions in an automated way, you will have to review these documents after the payment is processed. If you discover that they are invalid you can ask the customer to either pay the tax with another transaction or refund the order.
  • Tax on Shipping - You can choose to charge taxes on your shipping costs. This setting also follows the Inclusive/Exclusive logic.

European Union​

You should collect EU VAT if:

  • Your business is based in the European Union and you wish to sell cross-border to other EU countries. If you wish to just sell within your EU country, follow the Other Countries section instead of this one.
  • Your business is outside the EU but sees a large volume of sales to EU customers (consult with a tax professional for more info)

For the EU, our tax handling system assumes that your business is registered for the OSS (one stop shop) scheme. This is a major simplification to the way EU VAT is handled, and is the only EU tax regime supported by Reflow. Ask your accountant how you can register for this scheme.

Configuration​

You configure EU taxes by uploading a CSV file with rates. Here is an example. Some notes:

  • To get up to date VAT rates, download an xlsx export file from this database. You can filter only the standard rates and copy the data to a new csv, following the format in our example above.
  • If the buyer country is missing in the list, no VAT will be charged to customers from the country.
  • If you create a separate tax config for an EU country, it will override the tax rate in the CSV. So for example if you include France in the EU CSV, and as a separate country, the separate country config will be used when a French customer buys your products.
  • Occasionally countries change their VAT rates. Your accountant will help you be up to date with the rates.
  • Only one VAT rate by country is supported at the moment.
  • VAT rates values should be in the form of a percentage and not a decimal. For example, a rate of 19.50% is represented as 19.50 and not 0.1950.

After this, you enter your VAT registration numbers. It's possible that your business has VAT registrations in more than one country. These settings are used to determine whether a customer purchase is treated as a cross-border transaction. If a customer purchases from a country in which you have a VAT registration, then they can't use a VAT exemption under the reverse-charge mechanism.

Additional Options​

  • Pricing Type - Inclusive or Exclusive. Inclusive pricing means that taxes are included in the price of your goods. Exclusive means that tax is added on top of the price during checkout. For example, a purchase of a €100 product under a 19% VAT rate, will show a total cost of €100 under an Inclusive tax, and a €119 under Exclusive. If this is a cross-border transaction and the customer provides a vat number, they will get to pay €84.03 under Inclusive tax and €100 under Exclusive.
  • VAT on Shipping - You can choose to charge VAT on your shipping costs. This setting also follows the Inclusive/Exclusive logic.
  • Automatically Validate VAT IDs - In cross-border transactions, customers can enter their VAT numbers in order to exempt their purchase from VAT. If this setting is on, we will validate these numbers using the VIES system system.
  • If VIES is Down - Since it's possible the VIES system is temporarily unavailable, we give you the option of either permitting or rejecting transactions. If you choose to permit transactions when VIES is down, you will need to validate the VAT number yourself before shipping any products. In case the VAT number is invalid, you will need to either ask the customer to pay the VAT amount, or to refund their transaction.

Other Countries​

If your business has a tax registration in a country outside the USA and EU, or if you are EU based but wish to sell only within your country's borders, you can configure a tax rate for your specific country.

Available Options​

  • Tax Rate - The tax rate in percent. For example, a rate of 19.50% is represented as 19.50.
  • Tax Number - The tax registration number of your business.
  • Tax Name - For example VAT, GST, Sales Tax etc. This is the official name of the tax in your country. It will be shown to users as a line item during checkout.
  • Pricing Type - Inclusive or Exclusive. Inclusive pricing means that taxes are included in the price of your goods. Exclusive means that tax is added on top of the price during checkout. For example, a purchase of a $100 product under a 6% tax, will show a total cost of $100 under an Inclusive tax, and a $106 under Exclusive. If the customer is outside of your country (in which case no tax is charged), they will get to pay $94.34 under Inclusive tax and $100 under Exclusive.
  • Tax on Shipping - You can choose to charge taxes on your shipping costs. This setting also follows the Inclusive/Exclusive logic.