How do I set up threshold tax?

Certain US states use a threshold tax system. In this tax system, products are taxed at a particular rate based on the total retail price of the product.

Assign a tax code to products

Before creating a threshold tax, you will need to assign the default Clothing and Footwear tax code to product(s) in your store for any eligible for threshold taxation. 

1. Navigate to Products -> Products and filter for the products you need to edit. Click Edit Product

2. Select a tax code from the drop-down under the Tax section of the edit page. 


3. Select Save to apply your changes. 

Creating a new sales tax

1. To create a new tax rate navigate to Setup -> Sales Taxes and click on Add Sales Tax.


2. In the pop-up window, name your tax and type in the tax percentage. 

3. Save your tax. 

Your store will also have a 'no-tax' 0% rate set. You cannot remove this.

Assigning a tax threshold 


4. Select Add Exemption if certain products in your store will be exempt from this tax type, as long as their price does not exceed a certain amount.

5. From the drop-down menu, select the tax code in your store that will qualify for this exemption. 

  • For example, in the image above, products with the tax code 'Clothing and Footwear' will only be eligible for NYC county tax if their retail price exceeds $110. 

6. In the Threshold ($) field, enter the amount at which point the exempted products will be taxed. 


An item's entire price will be taxed if it exceeds the threshold. For example, in the image above, if a product with the Clothing and Footwear tax code is sold for $115, the tax rate will apply to the entire $115.

Apply your tax rate 

7. If you have products and outlets that are currently using another tax rate, and want to update these items to the new tax rate you are creating, select Change the tax used by outlets and products to this new Sales Tax, instead of an existing Sales Tax...

8. From the drop-down menu, select the tax rate you will be replacing. 

  • For example, in the image above, any products and outlets currently using No Tax (0%) will be updated to NYC County

9. Click Add Sales Tax to save your changes. 

Did this answer your question?
Have more questions? Contact us so that we can help you out.