Tax-exempt Customers in Magento 2 – Set Up And Configuration

What is a sales tax exemption in Magento 2? A sales tax exemption certifies a business or organization to make purchases tax-free on orders that…
  • Alyssa Schaad
  • Support Operations Manager
  • April 9, 2020 Estimated reading time: 2 minutes

What is a sales tax exemption in Magento 2?

A sales tax exemption certifies a business or organization to make purchases tax-free on orders that would otherwise be subject to tax. Here are some examples in which sales tax is waived:

  • A tax-exempt organization, such as the Girl Scouts, making purchases for their events
  • Retail businesses generally would not have to pay sales tax when buying wholesale items that will be resold to an end-user. The reason for this is because the end-users are already required to pay the sales tax when they make the purchase. 

How to set up Tax-exempt Customers in Magento 2

1. Create a tax rule

Create a new tax rule. Navigate to Stores > Taxes > Tax Rules

Click on “Add New Tax Rule

Name: Tax Exempt

Tax Rate: Select “Add New Tax Rate

Create a new Tax Rate for Tax Exempt:

This rate will be for all states in the United States. If Tax Exempt is used in other countries, additional rates will need to be added.

Save the Rate.

Select Tax Exempt under Tax Rate:

Next, go to Additional Settings

You will need to create a new Customer Tax Class. Click on Add New Tax Class and type in Tax Exempt and click the checkbox. Now select Tax Exempt under Customer Tax Class

Save the Rule.

2. Assign the new customer tax class to a specific customer group

After the rule is created, you will want to assign this Customer Tax Group to a Customer Group. We will use Wholesale as an example.

Navigation to Customers > Customer Groups

Select the Wholesale Customer Group and change the Tax Class to Tax Exempt:

3. Assign customers to the customer group

Under Customers > All Customers, while creating a new customer or by editing existing customers, you can choose the “Wholesale” customer group for this customer.

4. Testing the rule

You will want to test the rule to ensure it works properly.

Tax is set up for New York State on the testing site I am working on. While testing an order as a Guest, I see tax appearing: 

Logging into my wholesale account where the customer is tax exempt, I can confirm tax is not collected.

We hope you found this Magento 2 Tax Exemption tutorial helpful. Now you know how to configure tax exempt customers on your Magento 2 website and can provide your customers with a tax free shopping experience!

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