How to set up tax rules in Magento 2?

Every country or even state has its own tax rules that you should follow. In this article, we'll talk about Magento 2 tax configuration.

Here are the Magento tax settings you need to do: 

Step 1. Sign in to your Admin panel and navigate to Stores > Taxes > Tax Rules.

Step 2. On this page, click on the Add New Tax Rule button.

Step 3. Then, specify the Name of the rule, choose what Tax Rate to apply. You can edit the Tax Rate if needed. For this, click on the Edit icon, make changes, and save.

Note: There are 2 options for how you can set a new tax rate in Magento 2:

1. Click on the Add New Tax Rate button under the Tax Rate list and complete the form following the guide. Don’t forget to save the changes.
2. Scroll to the bottom of the page, find the Magento 2 Import Tax Rates line, and upload the needed CSV file.

Step 4. Go to the Additional Settings section and select Customer Tax Class and Magento Product Tax Class. Both of them you can edit by clicking the Edit icon that appears on hover.

Step 5. Next, set up the Priority of the rule. This setting is necessary for situations when you need to use 2 or more tax rules. Taxes with the same priority level will be applied together, and with the different priorities will be compounded.

Let’s consider 2 examples.

Say, the tax rule 1 (7%) and tax rule 2 (20%) have the same priority settings, so the total cost will be calculated from the product price and total tax at the rate of 27% of the prod price.

But, if these Magento tax configurations have different priorities, they will be calculated one by one. Say, tax rule 1 has a higher priority level, so in this case, the total cost will consist of the good price, 7% of the product price, and 20% from the sum of the product price and the tax 1.

Step 6. Select the Calculate off Subtotal Only checkbox if this rule should be assigned to the order subtotal.

Step 7. Then configure the Sort Order to specify how this rule will be listed with others.

Step 8. Save the changes.

Make your payment process even more flexible. Set up Payment Restrictions to configure what payment methods are available for certain shipping addresses, customer groups, store view, or product attributes.