by Monica Olinescu on August 17, 2009
Objective: Set up the taxation system for Magento for sales within different provinces of Canada.
Entering the Tax Rates for Retail Sales in Canada
The tax rates used in this example are listed below. DISCLAIMER: the rates and tax rules may not be correct or up to date and are listed here to demonstrate how different rates can be implemented in Magento. Do not use these rates without verifying with the proper authorities that they are correct.
|GST (Canada-wide)||5%||Applied to products and shipping all over Canada.|
|HST (New Brunswick)||13%||Includes GST|
|HST (Nova Scotia)||13%||Includes GST|
|HST (Newfoundland)||13%||Includes GST|
|PST (Ontario)||8%||Added to GST|
|PST (British Columbia)||7%||Added to GST|
|PST (Manitoba)||7%||Added to GST|
|PST (Saskatchewan)||5%||Added to GST|
|PST (Prince Edward Island)||10%||Compounded with GST|
|TVQ (Quebec)||7.5%||Compounded with GST|
* Tax rates for the territories are not included here, and to my knowledge Alberta does not have any retail sales tax.
The first step is to set up the tax rates within Magento.
Go to Sales > Tax > Manage Tax Zones & Rates. Click Add New Tax Rate and fill out the relevant information. Enter the name of the tax in the Tax Identifier. This name will appear on the customer’s invoice. Leave the Zip/Postal Code field with a “*”. For the rate field you can enter integers to represent the percentage of the tax. For example, entering 7 will set the rate to 7%.
After you entered all the rates for each province the Manage Tax Zones & Rates main screen should look like this.
Setting up the Tax Rules
Now that we have defined the tax rates for each province we need to give Magento some more information about how to use the rates:
• Taxes (as defined below) are applied to all products and shipping charges for all customers.
• GST is applied to all products sold to any province except NB, NS, and NF where HST is applied
• For Ontario, BC, Manitoba and Saskatchewan, apply GST to the amount before taxes and apply PST to the amount before taxes and add them up for the grand total.
• For PEI and Quebec apply the GST to the amount before taxes and then apply PST/TVQ to the (amount before taxes + GST)
To set up the tax rules open up Sales > Tax > Manage Tax Rules and click Add New Tax Rule. In the Tax Rate field you will see all the rates that were added in the previous step.
Setting up GST and HST
Let’s add the GST for all provinces and the HST for the relevant provinces for taxable goods and shipping (as far as I know shipping is provided as a service and can be marked up and is therefore taxable in Canada – don’t take my word for it).
Name: Retail Customer-Taxable Goods-Canada (can be anything you like)
Customer Tax class: Retail Customer
Product Tax class: Select both Taxable Goods and Shipping by pressing down Ctrl and clicking on the two items.
Tax Rate: Select GST and the HST tax rates (for NB, NS, NF)
Priority: Set this to 1. This field will be explained later.
Sort Order: Set to 1.
Save the tax rule and let’s see if this worked. Go to your store and add an item in the cart. When the shopping cart page is displayed you should see an Estimate Shipping and Tax box. Select Canada, Newfoundland and click Get a Quote.
You should now see a little + to the left of ‘Tax’ in the grand total box. Click that to open up the tax details.
Note: If you’re not seeing the tax details, it may be because the store is configured to hide the tax details. To fix that go to System > Configuration > Tax : Display and set Display Full Tax Summary to “Yes”.
If you select a province like Ontario or British Columbia you should see:
This is incorrect because for these provinces we need to apply the PST to the subtotal and add it with the GST to determine the ‘Grand Total’.
Adding non-compounded provincial sales taxes to the GST
As listed in the table at the beginning of the post, the PST for Ontario, British Columbia, Manitoba and Saskatchewan must be added to the GST, but unlike compounded taxes like the TVQ and the PST in Prince Edward Island, the PST must be applied to the original subtotal and then added to the GST.
To do that we need to add individual tax rules for the tax for each province as follows.
By setting the Priority field to 1 we are telling Magento to add the tax with other taxes with the same priority (like the GST tax defined with the rule Retail Customer-Taxable Goods-Canada).
Try out these new settings.
Adding compounded provincial sales taxes to GST
In PEI and Quebec the provincial tax is applied to the amount = subtotal + GST applied to the subtotal. To define this compounded tax rule we need to tinker with the Priority field and set this field to 2 (since our GST tax rule has priority 1).
The final tax rule table will look like this:
If the taxes changing as you select different provinces in the estimator you may want to check the ‘Tax Based On’ field in System > Configuration > Tax : Calculation . Make sure it is not set to ‘Shipping Origin’.
Reference: This post was created using in part information from a very helpful post on the Magento forum.