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Taxes Architecture Overview

In this document, you’ll learn about taxes in Medusa.

Overview​

Taxes are fees applied on items and shipping options when making a purchase. Taxes are typically different for each region around the world, both in amount and calculation logic.

In Medusa, there are different ways you can customize taxes, allowing you to implement what works for your setup or the regions your commerce store operates in. You can:

  • Create a tax provider that defines the tax lines applied to line items and shipping methods.
  • Customize the tax calculation strategy to change how taxes are calculated.
  • Override tax rates for specific products, product types, or shipping options in a region using API Routes or services.

Taxes in Regions​

Since taxes are different for each country or region, taxes are configured per region.

In the Region entity, the following attributes are related to taxes:

  • tax_rate: a number indicating the default tax rate to be applied in the region.
  • tax_code: a string indicating the tax code of the region. This can be useful to external systems for accounting purposes.
  • gift_card_taxable: a boolean value indicating whether gift cards in this region are taxable or not. By default, it’s true.
  • automatic_taxes: a boolean value indicating if taxes should be calculated automatically during checkout in that region. By default, it’s true.
  • tax_provider_id: the ID of the tax provider used in the region. By default, the system tax provider is used. The tax provider can also be accessed by expanding the tax_provider relation and accessing region.tax_provider.
  • includes_tax: a boolean value indicating if tax-inclusive pricing is enabled in the region. You can learn about tax-inclusive pricing here.

Tax Rates​

A region has a default tax rate, defined in the tax_rate attribute. However, you can override this tax rate for specific products, product types, or shipping options in that region.

This is represented by the TaxRate entity. A region can have many tax rates, and the taxes rates can be accessed by expanding the tax_rates relation and accessing region.tax_rates.

Since a tax rate can be used to override taxes for specific conditions, the TaxRate entity has the following relations:

  • products: an array of products that this tax rate applies to. You can access them by expanding the products relation and accessing tax_rate.products.
  • product_types: an array of product types that this tax rate applies to. You can access them by expanding the product_types relation and accessing tax_rate.product_types.
  • shipping_options: an array of shipping options that this tax rate applies to. You can access them by expanding the shipping_options relation and accessing tax_rate.shipping_options.

The TaxRate entity’s attributes include:

  • rate: a number indicating the tax rate to apply for the specified conditions.
  • code: a string indicating the tax code of this rate.
  • name: a string indicating the name of the tax rate.
  • region_id: a string indicating the ID of the region this tax rate applies to. You can also access the region by expanding the region relation and accessing tax_rate.region.

Tax Provider​

Tax providers are used to return the tax line items for a set of line items and shipping methods during checkout. The Medusa backend has a system tax provider. It returns the line items as-is, without making any changes. You can also create your own tax provider that matches your use case.

Each region can use a different tax provider. By default, regions use the system tax provider.

For example, the tax provider allows you to use the shipping address of the cart to create tax lines.

Tax Lines​

During checkout, taxes are applied to line items and shipping methods as tax lines. The taxes applied to line items are represented by the LineItemTaxLine entity, and those applied to shipping methods are represented by the ShippingMethodTaxLine entity. Both entities extend the TaxLine class, which defines the following attributes:

  • rate: a number indicating the applied tax rate.
  • name: a string indicating the name of the tax rate.
  • code: a string indicating the tax code.

In addition to these attributes, the LineItemTaxLine entity has an item_id attribute, which is a string indicating the ID of the line item this tax line is applied to. You can also access the line item by expanding the item relation and accessing line_item_tax_line.item.

On the other hand, the ShippingMethodTaxLine has the attributes of TaxLine along with the shipping_method_id attribute, which is a string indicating the ID of the shipping method this tax line is applied to. You can also access the shipping method by expanding the shipping_method relation and accessing shipping_method_tax_line.shipping_method.

Tax Calculation Strategy​

The tax calculation strategy is used to calculate taxes based on a set of line items, tax lines, and a context during checkout. The strategy is used throughout the Medusa backend, such as when calculating the totals of a cart.

Medusa defines a default tax calculation strategy. It calculates the taxes of line items and shipping methods, and returns the total of the two.

You can override the tax calculation strategy to define a calculation strategy that works for your use case.

See Also​

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