Threshold taxes are only available to retailers with tax-exclusive stores
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.
Retail POS allows you to set up and apply threshold taxes based on certain price thresholds being met at the time of sale.
Creating a new sales tax
First, you need to create a new sales tax rate that will act as the threshold tax. Follow the steps below:
1. To create a new tax rate, navigate to Setup > Sales taxes and click on Add sales tax.
2. Enter the Tax name for this tax and the Tax rate as a percentage.
3. Select Add exemption for clothing and footwear.
4. In the Threshold ($) field, enter the amount at which point the exempted products will be taxed.
- For example, in the image below, products with the tax code for clothing and footwear will only be eligible for Massachusetts Apparel & Fabric Goods tax if their retail price exceeds $175 and is only taxed on the amount that exceeds the threshold.
5. Under the section If the product price exceeds the threshold, charge tax on: drop-down, select whether the threshold tax will tax The entire product price or Only the amount exceeded the threshold.
6. 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 the box beside Change the tax used by outlets and products to this new Sales Tax, instead of an existing Sales Tax. If not, skip to step 9.
7. 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 Cali tax (8%) will be updated to MA Tax (6.25%).
8. Click Add sales tax to save your changes.
Assign a tax category to products
Now that the threshold tax has been created, you will need to assign the default Clothing and Footwear tax code to product(s) in your store for any eligible product for threshold taxation.
1. Navigate to Catalog > Products and filter for the products you need to edit.
2. Click Edit product.
3. Scroll to the Tax section and select a Tax category from the drop-down - in this example, Clothing & Footwear.
4. Select Save to apply your changes.