As with most things in Magento the configuration of tax is extremely thorough and flexible – but you do have to think a little bit to set it all up, here is a quick guide to doing just that. Configuration First take a look at the System->Configuration options for VAT under the sales section. Here we have loads of options for how the tax should be applied to order and defaults to use before we actually know where the customer is ordering from or delivering to. Highlighting a few of the more important options… Tax Calculation Based On This lets you specify if the tax calculation should be based on the delivery address, billing address or simply the location of the store itself. This is important as some jurisdictions require that you use a specific address to avoid people avoiding the tax. Catalog Prices This controls whether the prices you enter into the products themselves contain tax or not already. If you want to set specific price points such as Â£9.99 then often it is simpler to enter it including the tax and allowing Magento to work it out for you. Default Country This allows you to assume where customers will be ordering from and show them appropriate prices. Normally you would set this to the location the store is catering for e.g. your US store is set to US and your UK is set to UK. This way UK tax will be displayed in the prices on the UK store but not on the US store. Display Settings There are then numerous options to control where to show tax included in prices and where to exclude it. For example, you may want to show tax included in the prices all the way through to the checkout where you break it down further so the customer can see the tax separately. VAT Classes VAT Classes allow you to charge different rates of VAT to different customers or products. There are two menu items found under Sales->VAT that allow you to set Customer VAT Classes and Product VAT Classes. THe product VAT classes are used when you add a product to set a class (which will be used later). You might want to do this is certain products have a higher rate of tax. The Customer VAT classes are used when you edit a customer group such as wholesalers compared to retail customers. VAT Rates The VAT rates refer to the actual rate charged in different countries and optionally regions and postcodes. You can use the Sales->VAT->Manage VAT Rates option to manually add and edit rates against countries or you can use the Import / Export VAT Rates option to do it in a csv file which is usually much better. VAT Rules Once you have configured your VAT classes and rates you bring it all together in the VAT Rules option. At this point you simply select combinations of classes and rates and apply them to specific countries. This enables you to vary the tax rates by customer groups, products, countries, postcodes.