Tax Rates and Rules

In this guide, you’ll learn about tax rates and rules.

What are Tax Rates?#

A tax rate, represented by the TaxRate data model, is a percentage amount used to calculate the tax amount for each taxable item’s price, such as line items or shipping methods, in a cart. The sum of all calculated tax amounts are then added to the cart’s total as a tax total.

Each tax region has a default tax rate. This tax rate is applied to all taxable items of a cart in that region.

The TaxRate data model has a rate property that represents the percentage amount. For example, a rate of 10 means a tax rate of 10%.

Combinable Tax Rates#

Tax regions can have parent tax regions. To inherit the tax rates of the parent tax region, set the is_combinable of the child’s tax rates to true.

Then, when tax rates are retrieved for a taxable item in the child region, both the child and the parent tax regions’ applicable rates are returned.

Override Tax Rates with Rules#

You can create tax rates that override the default for specific conditions or rules.

For example, you can have a default 10% tax rate, but for products of type “Shirt” it is 15%.

A tax region can have multiple tax rates, and each tax rate can have multiple tax rules. The TaxRateRule data model represents a tax rate’s rule.

The following two properties of the data model identify the rule’s target:

• reference: the name of the table in the database that this rule points to. For example, product_type.
• reference_id: the ID of the data model’s record that this points to. For example, a product type’s ID.

So, to override the default tax rate for product types “Shirt”, you create a tax rate and associate with it a tax rule whose reference is product_type and reference_id the ID of the “Shirt” product type.