how to set up tax zones for countries with variable state or province tax rates (eg Canada)

Setting up tax correctly in osCommerce-based carts can be confusing. In some countries, each state or province has a different sales tax. The following example uses Canada and the province of Nova Scotia as an example.

Step 1. Set up Tax Class
This is the actual name of the Tax that you will attach to a product or shipping module. If you’re in Canada, it would make sense to call this ‘Canadian Tax.’

In Admin >> Locations/Taxes >> Tax Classes … create the following by clicking New Tax Class – entering the Title and Description – then Insert. So you get:
create a tax class in cre loaded

Step 2a. Set up Tax Zones – Country
In Admin >> Locations/Taxes >> Tax Zones … insert a new Tax Zone called ‘Canada HST/GST 5%.’
Then with this new Tax Zone selected, click on Details and add each of the Canadian provinces to the ‘Canada HST/GST 5%’ zone by selecting Canada then the Province from the dropdowns.
setting a tax zone

Step 2b. Set up Tax Zones – Provinces
Now you need to add in each province on its own as a Tax Zone. Here is Nova Scotia as an example:
nova scotia tax zone

Once again with the Province selected, click Details and add itself to it’s own Tax Zone.
Do this for all provinces, creating a separate Tax Zone for each.

Why is Canada 5% and Nova Scotia 8%? These aren’t the current tax rates for either place.

Many provinces in Canada have a GST rate of 5%. The tax calculation is based on adding (or compounding) tax at a national and regional level (so country and state level) and because both entities must be created as Tax Zones, by setting Canada at 5% tax, you can then just set the province to carry the difference.

The system then adds together both rates to find the tax rate. So as an example, Nova Scotia, which at the moment has a tax rate of 13%, is set up with 8% tax (the difference between its actual rate and the Canadian rate it includes.)

Many provinces currently have a GST rate of 5%, so by making the tax zone ‘Canada’ at 5% the provinces don’t need to have any tax added (but listed with 0% tax.)

Step 3a. Set up Tax Rates – Country
In Admin >> Locations/Taxes >> Tax Rates … insert a New Tax Rate, choose ‘Canadian Tax’ as the Title, choose the Canadian HST/GST 5% Zone, enter the base tax rate of 5% and a description – tip: you can enter your Tax# here and it will print on invoices. Make the Priority 1.

Step 3a. Set up Tax Rates – Provinces
Yes, you guessed it – same for each province as the main Canadian tax rate in 3a. However, remember that the Tax Rate (%) you enter here is the actual provincial rate less the base Canadian rate of 5%. So some provinces will be entered as 0% Tax Rate, because their GST is equal to 5%. Here is Nova Scotia, with a tax rate of 13% total (5% Canada, 8% Nova Scotia):
set tax rate for nova scotia

Do the same for all provinces, creating a separate Tax Rate for each. In the case of provinces like Manitoba (5% tax) you would enter 0% Tax Rate in the right hand Tax Rate (%) box. Make the Tax Priority the same for all (ie 1.)

add tax rates for provinces

Step 4. Attach tax class
Edit your product and from the dropdown select ‘Canadian Tax.’ Now if a customer from Nova Scotia adds this taxable product to her order, the total tax of 13% will be applied to this product at checkout.

tax added to product via dropdown

Edit your shipping module – choose ‘Canadian Tax’ as the Shipping Tax rate. This will add the applicable provincial tax rate to your net shipping charges.
add tax to shipping module