Taxes and duties

When setting up a store on the Genstore platform, you need to be aware of the taxes and fees that apply to the products you sell and the regions where you operate. Whether it’s sales tax, value-added tax (VAT), excise tax, or other types of taxes, the fundamental principle is that merchants collect tax from customers at the time of purchase and then remit the collected tax to the relevant tax authority in accordance with local tax regulations.

Key concepts

Before setting up taxes, it's important to understand the following tax-related concepts.

Product tax

This refers to taxes imposed on specific products during their production, sale, or consumption. In different countries or regions, it may be called sales tax (SAT), value-added tax (VAT), or excise tax (EXC). Tax rates vary by country, region, and product type, and some products may be tax-exempt.

Shipping tax

Shipping tax is a tax applied to shipping fees during the transportation of goods. It is usually calculated as a percentage of the shipping cost.

Customs duties

Customs duties are taxes imposed on imported and exported goods. The applicable rate depends on factors such as the product category, the country of origin, and the importing country's trade policies.

Tax-inclusive pricing

This means that the product price displayed already includes the applicable tax, so the price customers see is the final amount they need to pay.

For example, if a sweater is priced at $110 (tax-inclusive) with a tax rate of 10%, the price includes a base product price of $100 plus a tax amount of $10. The total checkout amount remains $110.

TIP

Tax amount = (product price ÷ (1 + tax rate)) ✖️ tax rate

Tax-exclusive product price = tax-inclusive price ÷ (1 + tax rate)

Tax-exclusive pricing

This means the displayed product price does not include taxes, which are calculated separately at checkout and added to the total amount.

For example, if a sweater is priced at $100 (tax-exclusive) with a tax rate of 10%, the final checkout price would be $110, consisting of the $100 product price plus $10 in tax.

TIP

Tax amount = product price ✖️ tax rate

Final price at checkout = product price ✖️ (1 + tax rate)

Things to consider before setting up taxes

As a merchant, you are responsible for consulting with local tax authorities or a tax professional to ensure you charge the correct tax rate in applicable regions and properly report and remit taxes.

1. Where do you need to collect taxes?

Before setting up taxes, determine the regions where you need to collect tax. If you use manual tax settings, taxes will only be applied in the countries or regions where you have configured tax rates. No tax will be applied in areas where no tax rate is set.

2. What types of taxes do you need to collect?

Understand the types of taxes applicable to your sales, such as sales tax, shipping tax, and customs duties. Setting up taxes correctly helps prevent potential losses from undercharging taxes.

3. Should product prices include tax?

When pricing your products, consider whether your target sales regions require tax-inclusive pricing. Some countries have legal requirements for price displays. For example, in Germany and France, merchants are required to display tax-inclusive prices, whereas in some other regions, merchants may choose their preferred pricing method. You should also take into account local consumer expectations, product costs, and profit calculations when making this decision.

4. Should you use manual or automatic tax calculation?

Genstore offers both manual and automatic tax calculation options.

• Manual tax calculation requires you to set up tax regions and tax rates yourself and ensure that tax rates remain up to date.
• Automatic tax calculation integrates with third-party tax services (such as Avalara) to calculate applicable taxes for each transaction. With this option, you don’t need to track tax rules manually, but you will need to register an account and pay for the third-party tax calculation service.