Transactions with Global Tax#
This guide will walk you through the essentials of global tax calculation for transactions, the factors influencing it, and how to seamlessly integrate our tax computation guidelines into your application for accurate and efficient global tax compliance.
What is Global Tax?#
Global tax refers to the various taxes that may be applied to transactions involving international shipping of goods and services. This includes Value Added Tax (VAT) and other consumption taxes, which are calculated based on the destination of the goods. Factors Influencing Global Tax#
Several key factors determine the global tax applied to a transaction:1.
Shipping Address: The rules and taxes for a transaction are determined based on the shipping address provided. This is similar to how sales tax is applied in the United States, where the destination of the goods dictates the tax rate.
2.
Product Classifications: The tax rules for each item are determined by its product classification. These classifications help define which tax regulations are relevant to the items being shipped. The same rules are applied to the shipping fee.
3.
Jurisdictional Rules: To find the exact tax rules that apply to a transaction, one can refer to the jurisdictional rules of the transaction. This includes regulations for sales tax, VAT, or other global taxes. In the jurisdictionalSalesTaxRules under each item, you can find the rules of the country and the available tax regions as well.
4.
Region-Specific Tax Rules: The specific tax rules of a region within a country may be applied based on the shipping address. It is essential to include the region in the transaction's shipping address for accurate tax calculation.
5.
Fallback to Country Rate: If a country has regions but the specific region does not have its own tax rules, the country-wide tax rate will be applied.
6.
Handling Mismatched Regions: If there is a discrepancy between the country and the specified region in the shipping address, the system will return a 404 error. This ensures that the tax calculation process remains accurate and consistent.
JSON Fields and Tax Calculation#
Tax Fields in JSON#
Both the fields "salesTaxRates" and "gtRates" exist in the transaction data, but only one of them can hold the tax values at a time. These fields are present both in the "item" JSON and in the "transaction.salesTax" JSON.Final Tax Percentage and Amount#
The final tax percentage and amount for the transaction are stored under "transaction.salesTax" in the fields "rate" and "amount" respectively.
Identify the Tax Rules
Determine the applicable tax rules based on the shipping address and product classification.
Calculate the Tax Amount
Multiply the sales price by the applicable tax rate to determine the tax amount.
Add the Tax to the Sales Price
Add the calculated tax to the sales price to get the total amount due.
Example Calculation#
For a product sold at $100 in a location with a 5% VAT rate:Global Tax Rate: 5% (0.05)
Tax Amount: €100 * 0.05 = €5
Total Amount Due: €100 + €5 = €105
TIP
This guide streamlines the global tax calculation process by providing clear rules and ensuring compliance based on the shipping address and product classification.
