How taxes work in WooCommerce
A plain-English explanation of how WooCommerce handles sales tax, including how to set it up and your responsibilities as a store owner.
Tax laws are different in every country, state, and sometimes city. WooCommerce gives you tools to collect the right tax — but it's your responsibility (or your accountant's) to make sure you're collecting the right amounts. This guide explains how the system works.
Quick summary
Enable tax in WooCommerce → Settings → General and configure tax rates under the Tax tab. You can enter rates manually or use a plugin like WooCommerce Tax (formerly Jetpack Tax) or TaxJar to calculate rates automatically. Always confirm your tax obligations with an accountant — this guide explains the tools, not legal tax advice.
This is not tax advice
Tax law is complex and varies by location. Always consult a tax professional or accountant for guidance on what you're required to collect and where.
Enabling tax in WooCommerce
Tax is disabled by default. To turn it on:
Go to WooCommerce → Settings → General.
Tick the "Enable taxes" checkbox.
Click Save changes. A new Tax tab will appear in the Settings menu.
The Tax settings tab
Once enabled, go to WooCommerce → Settings → Tax to configure how tax works.
| Setting | What it does |
|---|---|
| Prices entered with tax | Choose whether your product prices already include tax (inclusive) or are shown before tax (exclusive). |
| Calculate tax based on | Use the customer's shipping address, billing address, or store base address. |
| Shipping tax class | How to tax shipping charges. |
| Rounding | Whether to round tax at the subtotal or per line item. |
| Display prices | Whether to show prices with or without tax on product pages and in the cart. |
Setting up tax rates manually
WooCommerce has three default tax rate tables: Standard, Reduced, and Zero. Most stores only need Standard rates.
Go to WooCommerce → Settings → Tax → Standard rates.
Click Insert row to add a rate.
Fill in the country code, state code (if applicable), and the rate percentage. For example: US, CA, 8.25 for 8.25% California sales tax.
Give it a Tax name (e.g., "Sales Tax" or "VAT").
Click Save changes.
Manual rates need regular updates
Tax rates change. If you enter rates manually, you're responsible for keeping them up to date. Consider using an automated tax plugin (see below) to avoid this.
Automated tax plugins
Entering and maintaining tax rates for every state and country is a lot of work. These plugins do it automatically:
| Plugin | Description |
|---|---|
| WooCommerce Tax | Free, built into WooCommerce. Calculates US rates automatically via Jetpack. |
| TaxJar | Popular paid service for US sales tax compliance. Also handles filing. |
| Avalara AvaTax | Enterprise-grade tax automation for complex needs. |
We can set up any of these for you. Just let us know which option fits your business.
Tax classes and products
WooCommerce uses "tax classes" to apply different rates to different products. By default:
- Standard — taxed at the full rate.
- Reduced rate — for items that qualify for a lower rate (common in the UK/EU for food or children's clothing).
- Zero rate — for items exempt from tax.
Assign a tax class to a product on the product editing page, under the General tab in the Product data section.
Common questions
Related guides
- Payment methods explained
- General store settings
- WooCommerce extensions explained
- PCI compliance, in plain English
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