I need help setting up sales tax

For customers to understand the exact price that they’ll have to pay for a product, you may need to submit the taxes that you collect. Because tax can be a complex subject, you have several different options for submitting tax.

This article helps you choose the correct option or combination of options.

On this page

• Before you begin
• Submit taxes correctly for your target country
• Determine the states in which you charge tax (US only)
• Understand how states charge taxes (US only)
• Types of tax settings (US only)
• How the Google determined tax rate option works (US only)
• Tax on shipping (US only)

Before you begin

Keep in mind that you’ll set up tax rates for each state in the U.S. that you charge taxes for. Typically, these are the states that your business has a physical presence in. If your products target the United States, but you don’t charge taxes in the United States, you must indicate that in your tax settings.

You can choose from the following options to determine tax in each state. Consult your tax advisor to understand which options would work best for you.

• Use the custom option to enter a flat rate if you charge all customers the same amount of tax regardless of where they're located.
• Allow Google to determine the tax if you charge taxes based on the location of your customers.
• Use the tax category [tax_category] attribute if you sell products in a state with a tax rate that differs from standard sales tax rates. For example, food or apparel may not be taxed in some states or may be taxed at a lower rate than other products. Learn more about tax categories
• Use the tax category [tax_category] attribute if you collect a non-standard tax rate for a product or a product is exempt from taxes.

Submit taxes correctly for your target country

Depending on your target country, you need to follow different requirements when submitting tax information.

Determine the states in which you charge tax (US only)

In the US, tax rates vary based on the buyer’s or seller’s location, such as state, county, and city. Each state or local tax authority will have its own rules, which will affect how much tax you should collect depending on where your business is required to charge sales tax.

Generally, you are required to collect sales tax in any state where you have a sufficient physical presence, such as offices, employees, property, or independent contractors. Each state has its own rules on what is considered a sufficient physical presence.

Consult your tax advisor to understand where you are required to collect sales tax.

Understand how states charge taxes (US only)

To understand which tax settings to use, you’ll want to know if the states you are required to collect sales tax in charge tax based on origin or destination:

• Origin-based states charge tax based on the seller’s location within the state. In Merchant Center, you can enter a custom rate for all sales made to a state, which you may want to consider for these states.
• Destination-based states charge tax based on the destination of the buyer within the state. In Merchant Center, you can select the Google determined rate option, which you may want to consider for these states. In addition, if you sell products in a home rule state, selecting the Google determined tax allows you to manually apply these tax rates to specific cities and counties.

Consult your tax advisor to understand how taxes are collected for a specific state.

Types of tax settings (US only)

The easiest way to set up tax is to use the tax settings in Merchant Center, where you can set up tax rates for each state.

You can also override taxes for each product by specifying it in your product data. Whichever method you choose, you’ll need to match the rate that you collect on sales.

When setting up rates, you have several options. Depending on your goals, you’ll probably want to use a combination of these options. Consult your tax advisor to understand what tax rate you should charge. Learn more about how to set up tax settings

How the Google determined tax rate option works (US only)

When using account tax settings, you can use the Google-determined tax rate option to automatically determine an appropriate rate. The rate is calculated based on the customer’s location using third-party data. For home rule states, you can select the cities and counties in which to collect sales tax. For non-home rule states, it will automatically charge sales tax throughout the state.

While the Google-determined rate is an easy option to set up, keep in mind that it's not a good fit for all situations:

• Tax rates are destination-based, not origin-based. Google will determine the tax rate based on the customer’s location, so use this method for destination-based states. For origin-based states, you may want to consider using the custom tax rate option or overriding tax settings with the tax [tax] attribute.
• Tax exemptions and reduced rates aren’t supported. If your product is tax exempt or has a special tax rate, you can’t specify that using the Google determined tax rate option. Instead, override tax settings with the tax [tax] attribute.

Consult your tax advisor to understand what tax rate you should charge.

Tax on shipping (US only)

When using the Google-determined rate, you can specify (for each state) if tax should be applied to shipping cost. If yes, then Google will calculate tax for both the product price and the shipping cost. The tax that customers find will be the sum of those costs.

Consult your tax advisor to understand if taxes should be collected for shipping in a specific state.

Related links

• Tax [tax]
• About tax settings
• Tax category [tax_category]
• Set up tax settings (US only)