Understanding VAT Implications

The value added tax (VAT) is a form of indirect sales tax paid on products and services at each stage of production or distribution, based on the value added at that stage and included in the cost to the ultimate customer. At each stage, the tax is assessed as a percentage on the amount by which goods have been increased in value from the raw materials or semi-manufactured stage.

VAT is imposed throughout the European Community and European Free Trade Association (EFTA) countries and many other trading nations, but not the USA.

When customizing your storefront to handle VAT, you need to consider these best practices:


See Taxation Impact On Subscription Fees to understand how tax calculations can significantly impact the subscription fees that you pay.

Storefront Customization

No storefront customization is necessary when dealing with VAT. All taxes are handled within Business Manager; no custom code is needed.

Select site > Ordering > Taxation > Tax Rates. Enter tax percentages as decimal (for example, 17.5% would be 0.175). You can also enter 17.5% directly and it will automatically convert to 0.175. Assign each product to an individual tax class, which is how tax classes are related to the rates (within the tax classes jurisdictions also come into play).

See Managing Site Taxes.

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