A simple guide for a basic setting of the Magento tax display in the front end

Some headache when configuring the Magento tax settings?
In this article I will try to give some simple tips, assuming that if you opt for the official documentation of the Magento support, it will be always updated and exhaustive :).
Basically, dealing with the Magento tax configuration needs focusing on 2 main preliminary issues:

1. Worldwide vat taxation in Magento
If you want to sell your products worldwide you MUST insert the product prices WITHOUT any tax.

This means that in the product price tab in the Admin panel you must be sure to have always net prices, i.e. prices without any tax
(see Admin > Catalog > Product x Item Edit > Prices tab).

This will be useful becouse the tax rate will be determined automatically by Magento, if you have correctly made the Tax setup I explained in the previous article (see Admin > Sales > Tax).
The Magento 1.8 architecture in facts assures a further degree of flexibility, in the sense that in each product price setting you must only indicate the nature of the product (Taxable Goods or Shipping Goods). Depending on the nature of the taxation, Magento will calculate therefore the tax rate, that is assumed from the tax rules settings and from the nature of the customer (if private o company).
In the figure you can see a red arrow pointing out the 2 important values (Product Price and Tax Class) of the Product Edit page.

product iem prices tab

The price tab of Product Item edit page of Magento.








2. Tax Display in the Magento Products (Front-End)
This topic is an answer to a typical user experience question: How do you show tax and prices to the Frontend users?
It’s a matter of web communication and a sort of field of sales. If your users see the net price, they can think prices are more competitive of a another ecommerce, for example, that displays the full price.
Anyway, in the very strategic step of the purchasing decision as the cart page, your users MUST not have any doubt about what is the real price.

That’s why I recommend a transparent configuration, where prices of 2 different products are always net prices, and displaying first a subtotal without taxation, and the overall total will show the full prices, including taxes and shipping costs.
So let’s see the configuration in Magento.
In Magento even if the price inserted in the product price tab of the Admin Panel is a net one, as shown in the previous picture, you can always have the possibility to show to your customers a price that is tax excluded or tax included.
This display setting of the product price is possible at different Front-end levels:
⦁ at the Price Display level (category level and in every list of products, and in the single product page also)
⦁ at the shopping cart level
⦁ in the order visualizations level (as in the customer’s order track, available in the personal area when logged, as in the invoice et cetera).
Where to display the taxes is more a matter of marketing, because generally showing prices with the tax included is more usual for private customers that are already used to make comparisons with full prices, as in the offline stores.
Anyway, if your ecommerce deals also with business customers, you can decide to show the taxes.

But another reason could be that simply you want to show more appealing prices, to increase the number of people who start the checkout process.

Another reason to avoid  is due  to the fact that for Magento calculating the VAT starting from the net price is easier than calculate it starting from the price tax included: the rounding of the calculation can lead to a difference between the numbers, at the risk to give a bad feeling to the customer. And this means the increase in the cart abandon rate, of  course.

So, I suggest a set-up of the tax front-end settings that has an inner consistency, i think.

Take a look at the picture and pop it up. If you go to the Panel > Configuration > Sales > Tax page,
you can edit all the different configuration possibilities at the 3 levels: the Price Display, Shopping Cart and Orders level.
But the most important setting is the Catalog Prices field in the Calculation Settings.
In this field you say to Magento if all the prices inserted in the products are tax included or tax excluded.

Magento tax sales settings

Magento > Configuration > Sales > Tax