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Managing taxes is a vital part of running an online business, especially for companies operating across multiple jurisdictions or offering diverse product ranges. Effective tax management ensures compliance with local regulations, keeps financial records accurate, and provides customers with clear, transparent pricing.

Solidgate offers a comprehensive tax management toolset designed to simplify these tasks. The tax solution allows you to configure taxes for all customer regions and apply them to invoices automatically. Tax calculations occur whenever an invoice is generated for a new subscription, a subscription renewal, or a one-time charge. Sales or service tax is calculated based on your tax configuration.

You can automate taxation for your invoices using Solidgate Tax, a deeply integrated, built-in solution.

Please note that Solidgate does not act as a tax expert but provides a solution designed to help businesses with tax compliance and regulations. It is recommended to use the Solidgate tax solution in combination with professional tax guidance.

Configure taxes

Before collecting payments with taxes, you need to configure locations where you want to collect taxes.

Add tax locations

You can configure taxes for your taxable regions within your Solidgate Hub account. Key aspects include:

• Location
• Tax application type
• Legal entities
• Start and end dates

1. Go to Taxes > Locations.
2. In the top-right corner, click on Add location.
3. In the pop-up window:
   • Select Location from the dropdown list.
   • Set the Tax application type to included or excluded.
   • Select one or several Legal entities from the dropdown list.
   • Set the Start date.
   • Optionally, set the End date.
4. Click on Add to save the location.

Set default tax category

To simplify and automate product creation, you can set up a default tax category for your account. This ensures consistent tax configuration and makes product catalog setup easier.

1. Go to Taxes > Tax settings.
2. Next to Preset tax category, select the preferred tax category from the dropdown list.
   The changes are saved automatically.

Create product with taxes

Once the locations and default tax category are created, you can associate them with products. When creating a product, you can configure both the tax behavior and tax category. Solidgate categorizes products using product tax categories to apply the correct tax rates based on regional regulations.

Tax behavior affects tax calculation in the same way as the tax category, with tax behavior options including:

• Location preset
  Product price is calculated based on rules configured in locations.
• Included
  Product price is the gross price and already includes applicable tax.
• Excluded
  Product price is the net price, and taxes are added later.

If you select the included or excluded tax behavior type, it takes priority over the location preset settings.

Understanding and selecting the correct tax behavior is essential for accurate product pricing, managing customer expectations, and maintaining compliance.

Once you add locations and are ready with the tax category, you can associate them with products and define the type of taxation:

• Tax category is taken from the tax category preset
• Tax behavior is taken from the location preset

1. Go to Billing > Products.
2. Find the product you need and click on it.
3. In the Tax section, click on Edit.
4. Select the tax category you need from the dropdown list.
5. Select the tax behavior from the dropdown list.
6. Click on Save changes.

Apply taxes to existing subscriptions

If you already have active subscriptions in Solidgate Billing and want to start managing taxes via Solidgate Tax, it is important to know how tax configuration affects existing charges.

Ways to manage taxes

You have two options for managing tax application:

• Location configuration
  Define tax behavior at the location level to automatically apply it to all products. This centralized setup scales across all future charges since products default to location preset.
• Product tax behavior
  Override location settings for specific products when you have unique business logic or tax requirements. Choose included, excluded, or location preset (default).

Taxes for existing and new subscriptions

Once you configure taxes for a location, all future charges follow this configuration, including renewals for existing subscriptions. To preserve pricing for existing subscribers while applying location-based taxes to new customers, configure tax behavior at the product level.

Example:
A subscription has a recurring charge of 10 CAD. After configuring Ontario, CA with excluded tax behavior, the next renewal becomes 11.30 CAD, where 10 CAD is the product price and 1.30 CAD is GST.

Maintain pricing for existing subscriptions

To keep the original price for existing subscriptions, you need to change the product tax behavior.

To change the product tax behavior

1. Go to Billing > Products.
2. Find the product you need and click on it.
3. In the Tax section, click Edit.
4. Change Tax behavior from Location preset to Included.
5. Click Save changes.

Using the example above, switching to included maintains the 10 CAD recurring charge. The tax is calculated within the total price instead of being added separately.

Use location-based taxes for new subscriptions

You can use the location-based tax rules for new customers while preserving pricing for existing subscribers.

To apply location-based taxes for new subscriptions

1. Create a new product with the same configuration as the existing one.
2. Set Tax behavior to Location preset.
3. Use this new product for all new subscriptions going forward.

This approach applies location-configured taxes to new customers while existing subscribers maintain their original pricing.

Handle configuration changes

You can edit locations and legal entities during their lifecycle. The available options depend on whether their setup has started, is active, or has expired, and on the tax application type.

Edit location

Manage location fields depending on its lifecycle state and tax application type.

• Location not started

  • Included – all fields are editable
  • Excluded – all fields except legal entities are editable, the same as during creation

• Location active

  • Included – you can set an end date and add a legal entity
  • Excluded – you can only set an end date

• Location expired
  Expired locations are view-only, requiring a new location to resume tax collection.

Edit legal entity

Changes to the legal entity setup also vary depending on its state and tax application type.

• Legal entity not started

  • Included – all fields are editable
  • Excluded – the legal entity itself cannot be edited, only location editing is available

• Legal entity active

  • Included – you can only set an end date
  • Excluded – you can only set an end date

• Legal entity expired
  Expired legal entities are view-only, requiring a new setup to resume tax collection.

• For locations with the included type, you need to add it manually.
• For locations with the excluded type, it is added automatically.

1. Go to Taxes > Locations.
2. Find the location you need and click on it.
3. In the appeared side panel, navigate to Legal entities to make changes.

Tax type switch options

You can switch between included and excluded types only when the location or legal entity is not started. If they are in active or expired states, you must first set an end date and then create a new setup with the preferred tax application type.

Tax calculation

Once you set up taxes and apply the tax category and behavior to a product, the system handles tax calculation automatically. Taxes are applied to future sales and all added locations.

The final price depends on the location setup, product settings including tax category and behavior, and the customer’s actual location. If a location is not included in the setup, tax is neither applied nor calculated.

Calculations follow the location configuration and depend on whether the tax is included in or excluded from the product price.

The payment process with tax calculations unfolds as follows:

1. The merchant creates a product and configures taxes for it.
2. A customer selects the product and adds it to their cart for payment.
3. The merchant turns to one of Solidgate’s payment solutions for displaying the price and for payment processing:
   • Payment Form
     It has the payment details event used to keep track of updates and changes to payment data, including price, taxes, and other relevant information.
   • Host-to-host
     Before creating a payment request, you should call the price calculation API endpoint to receive the final price information with tax details.
4. Taxes are calculated based on the customer’s location, including their address, ZIP code, other relevant details, and collected as follows:
   • Payment Form prompts customers to enter their location when paying with a card.
   • Apple or Google Pay uses the billing address from the customer’s digital wallet.
   • Host-to-host integration uses the customer’s address provided by the merchant.
5. Solidgate calculates the final price based on the product and tax configurations and returns this information to the merchant.
6. The merchant displays the calculated price to the customer.
7. The customer can now see the final price to proceed with the payment.

Solidgate supports all types of payments, including card and alternative payments such as PayPal, and covers the full payment lifecycle, including sales, refunds, and chargebacks. It helps businesses efficiently handle chargebacks and refunds, maintaining smooth payment processing.

Moreover, Solidgate provides tax data exports to assist with compliance and financial analysis. You can choose between a transactional tax report or a summary report with aggregated tax data.