Setting up taxes in Recharge
As a merchant, you may need to charge and collect tax from your customers and remit those taxes to the government. While understanding tax laws and regulations can be complicated, Recharge has made it easy for you to collect taxes on each order.
This guide provides instructions on how to begin charging taxes in Recharge, as well as how to adjust tax settings.
- BigCommerce Checkout Integration
- Recharge Checkout on BigCommerce
- Recharge Checkout on Shopify
- Shopify Checkout Integration (m)
Refer to Configuring tax settings with the Shopify Checkout if you are using the Shopify Checkout Integration.
Before you start
- You should always consult with a local tax expert to ensure that you are charging customers the correct sales tax.
- While Recharge makes it possible for you to collect taxes from your customers by charging taxes on each order, we do not remit your sales tax for you.
Enable taxes in Recharge
To enable taxes in Recharge:
- Click Settings in the merchant portal and select Taxes.
- Select Charge sales tax in the Charge tax section.
General tax settings
Specify your tax rules and how they should be applied in the Tax details section.
Include shipping rate in taxed prices
If enabled, Recharge will apply the tax rate to the cost of shipping in addition to the total order price.
Include all taxes in prices
Note: This setting is only available for Recharge Checkout on Shopify, Migrated Shopify Checkout Integration, and Recharge Checkout on BigCommerce stores. The ability to include all taxes in prices is not supported on the BigCommerce Checkout Integration.
If enabled, additional tax charges are not applied to the total order price. Instead, the system will apply a formula to the total price and report the amount that should be considered taxable. Products should be configured with the total price including tax.
The formula that is used:
tax = (tax rate * price) / (1 + tax rate).
For example, a customer purchases a product that is €1.00. This price is after VAT because tax is set to be included.
With VAT set to 20% the system calculates for a €0.83 product and €0.17 (rounded) in tax. The charge is displayed to the customer at a total of €1.00 tax included. You are then responsible for remitting £0.17 in VAT for that order when reporting taxes.
Run a check to see if all products are taxable
If enabled, Recharge will query Shopify for the tax settings on individual products to see if tax should be applied. If this setting is not checked, Recharge will apply taxes to all products in Recharge.
Charge tax in the US
If your business has a physical or economical connection with any state in the US, you likely need to charge sales tax. Refer to the guide Charging taxes in the US for specifics on setting up your US tax rates.
Charge tax outside the US
To learn more about how taxes are calculated for orders originating outside of the United States, refer to the guide Charging taxes outside of the US.
Update tax settings
When you adjust your tax settings in Recharge or Avalara, the tax rate is updated for existing subscription customers on future orders. Updating tax rates does not modify existing queued charges, only future orders. Contact the Recharge support team if you update or add additional tax rates in Recharge or your ecommerce platform to resync these rates and perform a bulk update.
Subscription customers are not impacted if tax settings are only updated through your ecommerce platform.
Avalara AvaTax
For more robust tax settings that include automated tax calculations and tax fillings, you may want to consider using the third-party app Avalara.
Avalara is a sales tax software that provides real-time rates based on tax jurisdictions, not ZIP codes. This allows for better accuracy when calculating tax rates.
Visit the Avalara guide to learn more about this feature.
Tax exemptions and overrides
While Shopify's tax overrides do not work with Recharge, you can set certain products and customers as tax-exempt to prevent taxes from being charged on an individual level. Refer to the guide Tax exemptions and overrides for more information on setting tax exemptions for Shopify merchants.
