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Store Tax Settings: Auto, Custom, Flat Percentage, and Tax Exempt

Each store has a tax setting that controls how sales tax is collected on that store's orders. This article explains the four options and when to use each one.

The Four Tax Settings

Auto

Calculates taxes based on your state using Stripe Tax. It picks up whether a state is tax exempt, tax holidays, and how taxes are calculated there.

  • If you have nexus in just your state, you'll likely use Auto.
  • If you have nexus in multiple states but haven't customized the settings for those individual states, Auto will tax orders in those states using your Stripe Tax settings.
  • If someone orders from a state where you don't have nexus, the order is treated as tax exempt.

Custom

Uses the nexus and tax settings you've set up in Custom Taxes under Dealer Settings. If you've customized how taxes are collected for individual states, use Custom so the store taxes based on those settings.

Flat Percentage

Overrides all other settings and collects tax at the flat percentage you enter for that store, no matter where the customer is or what they buy.

Tax Exempt

Sets the whole store to tax exempt. No tax is collected on any purchase in the store.

Setting Up Custom Nexus

Nexus means you have enough of a presence in a state that you're required to collect sales tax there.

  1. Go to My Account and open Dealer Settings.
  2. Open Custom Taxes.
  3. Check each state where you have nexus, and adjust any state-specific settings.
  4. Save your changes.
  5. Set the tax setting on any store that should use these settings to Custom.

Good to Know

  • No nexus, no tax. With Auto or Custom, orders going to a state where you don't have nexus aren't taxed.
  • Flat Percentage ignores product type. Product Tax Codes (like Clothing & Footwear) only affect the tax when the store is set to Auto or Custom.
  • Set your Origin Branch. Some states calculate tax from where the order ships from. Check that the Origin Branch under the store's Distribution settings is the location your products ship from.

Learn About the Updated Sales Tax Report

Learn More

For more on how Stripe Tax works, including product Tax Codes, see the Stripe Tax article.

Learn About Stripe Tax

How to Change the Tax Type on Specific Products