How to Setup Regional Sales Tax in Your PayPal Account

When running a web store and using PayPal as the payment processor, you can easily set it up so that PayPal will add the sales tax to the final amount (and optionally to the shipping amount as well) during checkout.

In a standard (perhaps traditional) PayPal transaction, the buyer will choose their items, and then be redirected to the PayPal site to complete the checkout. Once PayPal is able to determine the geographic location of the buyer is when the sales tax is added. In most cases this happens when the buyer logs into their PayPal account as that information is present in their profile.

At any rate, setting up tax rates in PayPal is very simple. PayPal doesn’t automatically determine the current tax rate though, it’s up to you to find the amounts for each region and then input the information.

Check with your accountant or other professional to determine if you should be charging tax for your product(s), and if so, to who.

In my case, selling software from Canada, I found that I must charge the appropriate tax based on the province/state of the buyer.

PayPal Sales Tax Setup Video Tutorial

Following are the Steps to Setup Regional Sales Tax in PayPal

In this example I am using a Canadian PayPal account but the process should be very similar (or even the same) if you do not reside in Canada.

1. First thing you want to do is go to your profile page in your PayPal account. The link for “Profile” can be found under the “My Account” tab near the top of the screen.
2. Next, click on “My Selling tools” from the left side.
3. From there, click on the “Update” link next to “Sales tax.” You might see something like “Regional Tax” or “Regional Tax Settings” instead. If so, click that.In the top box is where you can setup/edit domestic sales tax rates i.e. rates for your country of residence. Below that you can setup International rates.
4. In the box where you want to setup tax (Domestic or International) click on the link that says either “Add New Sales Tax” or “Add Another Sales Tax.” What the link says depends entirely on if you already have existing taxes setup or not.
5. In the Domestic box you simply pick the region (state or province), enter the tax rate (in percent), and put a check in the box if you want to charge tax on shipping as well. Then click the “Continue” or “Create Another” button.In the International tax rate box, it is very similar but you choose the country first. In some cases, depending on the country selected there may not be regions to select from, or there may even be extra options.For the U.S. for example, you can set tax rates based on State as expected, or by a specific (or set, or range) of zip codes.

That’s really all there is to it.

Now you just continue driving traffic to your store, let your shopping cart software handle the bulk of the transaction, then let PayPal take care of the sales tax and the payment.

When you configure sales tax like the way that was explained in this video, it will work with the simple wordpress shopping cart plugin too.