Please Define “Reduced Rate” and “Zero Rate” taxes in WooCommerce Plugin?

Hi there,

Thanks for reaching out!

Please Define “Reduced Rate” and “Zero Rate” taxes in WooCommerce Plugin?

These two tax classes are default when installing the WooCommerce Plugin.

I tried to find information to define “Zero Rate” and “Reduced Rate” tax and could not find anything to define it, not even on the WooCommerce site.

Reduced rate and Zero rate tax rates can be defined in WooCommerce >> Settings >> Tax:

https://cld.wthms.co/TIgZEe

This support document contains more information about the tax setup.

Most of the time these rates don’t have to be defined but perhaps your setup requires those to be set up if you’re getting a warning/error message.

I hope this helps!

Your misunderstanding what I mean by “define”. I cannot use those rates until I know what they mean and how they apply.

To define them is the same way as defining personal tax vs commercial/business tax, each being different and apply differently.

Here is an example of what I mean by define,

https://www.investopedia.com/terms/i/incometax.asp

That article defines and explains the different types of income tax.

So I am asking what does “reduced rate” and “Zero Rate” mean, how do they apply and when?

WooCommerce has to understand that all people are not accountants and not all of us understand business taxes or tax rates the way they think and WooCommerce really needs to define these various tax rates the plugin uses and explain them.

Hi there,

So I am asking what does “reduced rate” and “Zero Rate” mean, how do they apply and when?

Reduced rate, Zero rate and your custom tax rates can be set up as an alternative to the tax rates defined in the Standard rate section and whether the Standard rate or a different rate is used depends on the tax class that you set under Tax class in product settings.

WooCommerce plugin is used all around the world so it is up to you to figure out which tax rates are applicable to your products and if different tax rates are supposed to be used for different products.

Let’s say you have a single product that you sell to different countries. In country X the total tax due is 21 percent and in country Y it’s 18 percent.

In that case you’ll define both tax rates for countries X and Y in the same rate tab, Standard rate for example.

A second example: you’re selling product A and 21% tax is due in country X. You also have a product B with a different tax regulation that applies to it and the total tax due is only 10% in the same country. In that case, you’d define the tax rates for product A in Standard rates and the tax rates for product B in Reduced rates.

I hope this example helps but let me know if I misunderstood your questions about tax rates here.

If you’re looking for a solution that would calculate tax automatically – you may want to look into automated tax rates with WooCommerce Services or TaxJar.

Yes, that does explain “reduced rates”, thank-you.

Based on what you described, then the “Zero Rate” means zero? or does that mean something else?

If it means zero, then that is something used when a product does not require taxation among other products that do.

Then by that, if there is only one product to sell, and that is not taxed then I would not need to use reduced or zero tax rates at all and keep taxation part deactivated.

Is this all correct?

Hi there,

Yes, that does explain “reduced rates”, thank-you.

I’m glad to hear my explanation helped!

If it means zero, then that is something used when a product does not require taxation among other products that do.

Then by that, if there is only one product to sell, and that is not taxed then I would not need to use reduced or zero tax rates at all and keep taxation part deactivated.

Is this all correct?

Yes, that is correct. If you’re not planning to collect tax with your sales – then you can simply disable tax in general WooCommerce settings.

I appreciate the information and clarification.

Thank-you.

Resolved ??