Lightspeed eCom (C-Series) automatically generates the appropriate taxes for your online store when you enable automatic tax rates. Your customer's zip code determines the correct district, county, city, and state tax rates during checkout. Verify your local tax regulations to ensure you are charging the correct taxes.

It's not recommended to have automatic and manual tax settings enabled at the same time.

Understanding nexus

In the United States, the requirement to charge taxes is based on sales tax nexus, or sufficient physical presence or connection to the state. This definition varies by state, so it's essential to research the specific requirements for each state where your business operates. In some states, advertising within the state may be considered a sufficient connection.

In Lightspeed eCom, you should create a tax location for each state where your business has nexus.

Understanding tax models

States use one of three tax models to determine the applicable taxes for purchases outside of counties, cities, and districts:

1. Destination: Taxes are based on the destination of the order. Used by the majority of states.

   For example, if a merchant in New York City sells to a customer living in Syracuse, the customer will be charged taxes based on Syracuse's rates.

   If your store's nexus exists in more than one state, the Destination tax model will be used to determine tax rates for out-of-state orders.

2. Origin: Taxes are based on the shop's location. Less common.

   For example, if a merchant in Philadelphia sells to a customer living in Pittsburgh, the customer will be charged taxes based on Philadelphia's rates.

3. Hybrid-origin (California): State tax is applied to all orders in California and district taxes are applied only to orders inside your shop's district.

   For example, if the hybrid-origin setting is turned on and a merchant in Los Angeles sells to a customer living in San Francisco, the customer will only be charged California state taxes.

Setting up sales tax rates

1. In your eCom Back Office, navigate to Settings > Taxes.
2. Under Tax settings, set the Tax rate for new products should be to Calculate taxes automatically.
3. Enable All prices exclude tax.
4. To have taxes appear in the cart and at checkout, enable Show tax in cart and Show tax in checkout.
5. Under Automatic tax settings, click Change country selection and select United States.

   

6. Click Edit to add tax per state.
   

   

7. Under Tax rules by location, click Add a location.
8. Enter a Name and Address for your location. If you only have an online store, enter the address where you're located, like your office or warehouse.
   
9. Repeat these steps for every location that's in a different state. If you have multiple locations in one state, you only need to enter one location.

The tax rates for each zip code are updated monthly. If you don't see the correct rate in Lightspeed eCom, contact us.

Managing automatic taxes through tax overrides

Depending on your products and your location, you may have tax exemptions. You can create tax classes to identify products that have specific tax rates or exemptions and use tax overrides to specify how much tax customers should pay for those products. It's recommended to check with the state or a tax specialist to understand tax exemptions.

Overriding taxes for individual items

1. Navigate to Settings > Taxes.

   

2. Click United States.
3. Under Tax classes, click Add a tax class.

   

4. Give the tax class a name, such as Clothing.
5. Select the tax class you created.
6. Click Add product and choose which products to assign to the tax class.

   

7. Click Save.
8. Click Back to Taxes.
9. Click United States.
10. Click Add a tax override and select the tax class you created.

    

11. Select the tax override you created and adjust the tax rates per state, county, city, or district, as needed.
    1. Tax rules for New York and Minnesota can also be enabled.

    

Overriding taxes for a group of items

1. Navigate to Settings > Taxes.

   

2. Click United States.
3. Under Tax classes, click Add a tax class.
4. Give the tax class a name, such as Clothing.
5. Select the tax class you created.
6. Enable Create a group of products.

   

7. Select Include all products if you're adding all your products in your shop to this tax class or Include a group of products if you want to filter for specific products.

   

8. Scroll down to Exclude products and click Add product to exclude products from this tax class.

   

9. Click Save.
10. Click Back to Taxes.
11. Click United States.
12. Click Add a tax override and select the tax class you created.

    

13. Select the tax override you created and adjust the tax rates per state, county, city, or district, as needed.

    If relevant to your business, you can enable the New York Clothing under $110 or Minnesota Retail Delivery Fee tax rules.

    

State-specific tax settings

Specific tax settings can be enabled as tax overrides, for your tax classes. This ensures that you are adhering to your jurisdiction's tax laws as a merchant.

• New York clothing tax override

  New York's clothing under $110 tax rule can be enabled for your tax classes as a tax override. Navigate to Tax Overrides and enable New York Clothing under $110 under Tax Rules.

  

  Enabling New York Clothing under $110 will exempt taxes when:

  • You added products to a tax class and that tax class is selected in the tax override.
  • The price of the product is $110 at checkout, before taxes, and after discounts.
  • Your order's shipment is destined for an address within New York state.

  Due to various local tax laws, the amount of the tax exemption will vary by region in New York. Automatic taxes are designed to account for these differences.

  It's recommended you add all tax-exempt items to the tax class, regardless of price. That way, if an item is discounted and the new price is under $110, no other setup is required for the tax exemption to apply.

• Colorado retail delivery fee

  As of July 1, 2022, Colorado imposes a retail delivery fee on all deliveries by motor vehicle to a location in Colorado. To help merchants in Colorado meet this requirement, Lightspeed eCom automatically applies this flat tax rate of $0.27 on orders when:

  • Colorado is listed as a location in your automatic tax rates.
  • The shipping address of the order is in Colorado.
  • The shipping method of the order isn't set to Pickup.
  • The shipping method of the order has automatic taxes turned on.
  • The order is taxable (the total tax rate of the order isn't 0%).

  The retail delivery fee doesn't apply if you sell non-taxable goods.

  If you offer non-motorized vehicle delivery, like bike couriers, you can bypass this automatic retail delivery fee by turning off automatic tax calculations in the shipping method's settings.

  Important details about the Colorado retail delivery fee

  • The Colorado retail delivery fee prints on invoices. However, it doesn't show in email notifications to customers if you're using the [[details]] key as placeholder text.
  • If the Colorado retail delivery fee is applied to an order, don't split items on separate invoices.

  • If you set up your account to combine taxes at checkout, the federal, regional, and municipal taxes display as one tax rate. However, the Colorado retail delivery fee is not included in the tax rate and is displayed in the tax value.

    For example, if the subtotal of an order is $100, the combined tax rate is 10%. The tax value will be $10.27 instead of $10.00 because the Colorado retail delivery fee automatically applies.

• Minnesota retail delivery fee

  As of July 1, 2024, Minnesota imposes a flat rate retail delivery fee of $0.50 on certain transactions involving retail delivery in Minnesota. This fee is not automatically applied to orders.

  Lightspeed eCom provides the option to enable this fee on orders if the following applies:

  • Minnesota is listed as a location in your automatic tax rates.
  • The shipping address of the order is in Minnesota.
  • The shipping method of the order isn't set to Pickup.
  • The total price of eligible items in the order exceeds $100.
  • The order is taxable (the purchaser is not tax-exempt).

  Not all products are eligible for the Minnesota retail delivery fee and exemptions exist for certain delivery methods with permits from the state. See the Minnesota Department of Revenue for more information.

  Enabling the fee per product

  1. Navigate to Settings > Taxes.
  2. Click United States.
  3. Under Tax classes, select the eligible products.
  4. Under Tax override, enable Minnesota Retail Delivery Fee.

     

  Calculate taxes automatically must also be enabled per delivery shipping method.

  Important details about the Minnesota retail delivery fee

  • The Minnesota retail delivery fee will appear as Road Improvement and Food Delivery Fee on invoices.
  • It won't appear in email notifications if you use the [[details]] key as placeholder text.
  • Creating a credit invoice to partially or fully refund an order will not refund the delivery fee.
  • Canceling an order or canceling an order after processing a partial refund will refund the delivery fee.

  • The Minnesota retail delivery fee will appear as a separate fee if combined taxes at checkout is enabled in Settings > Taxes.

    For example, if the subtotal of an order is $150.00, and the eligible items exceed $100, the combined tax rate is 8%, and the tax value is $12.00 plus the additional $0.50 for the Minnesota retail delivery fee.