Below you can find a description and the calculation logic used by Linnworks for tax and discount calculations for channel and direct orders. Examples are also provided for each scenario described.

Tax Rate:


Channel orders

Some channel integrations (e.g. Magento 1 and Magento 2, Shopify) have a Use channel tax settings option which enables to use the tax rate applied to the order on the channel directly. If this setting is enabled, the tax rate on the order in Linnworks will match the tax rate from the channel. 


Please see the respective channel integration documentation for the available configuration settings from the list here.


If the channel integration does not have this option or when the setting is disabled, the same logic is used that is applied to Direct orders as below.


Direct orders

Linnworks uses the tax rate for items either:

  • Based on the item Tax rate as specified in Product Details (Inventory > My Inventory > click on SKU > General tab)
  • Or if Country specific rate is enabled on the item instead of an item Tax rate, the tax rate is taken based on the order destination country tax rate as specified in the Countries list (Settings > General Settings > Default Settings > Manage Countries).

Scenario 1:

  • Order destination country is Belgium.
  • Order contains Product A.
  • Product A has an item Tax rate of 15% added.



Item Tax takes priority over destination country tax rate, so the Tax Rate on the order item line is taken from the item Tax value and is respectively added as 15%:




Scenario 2:

  • Order destination country is Belgium.
  • Order contains Product B.
  • Product B has Country specific rate enabled.



  • Countries list Tax Rate for Belgium is specified as 21%



Product has no Item Tax specified, so Country specific rate is taken from the Countries list based on the order destination country and is respectively added as 21%:




Scenario 3

  • Order destination country is Belgium.
  • Order contains Product A and Product B.
  • Product A has an item Tax rate of 15% added while Product B has Country specific rate enabled.
  • Countries list Tax Rate for Belgium is specified as 21%.


Product A will use the item tax rate and Product B will use the Country specific rate and the values are respectively added per line as 15% for Product A and 21% for Product B:




Line tax:


Channel orders

  • Some channel integrations (e.g. Magento 1 and Magento 2, Shopify) have a Use channel tax settings option which enables to use the tax values to the order on the channel directly. If this setting is enabled, the tax values on the order in Linnworks will match the channel. 


Please see the respective channel integration documentation for the available configuration settings from the list here.


  • If the channel integration does not have this option or when the setting is disabledeach line is calculated presuming that the product prices are inclusive of tax.


Line Total = Unit Cost * Quantity

Line Tax = Line Total - (Line Total / (1 + Tax Rate)° 

Each (Ex Tax) = Unit Cost / (1 + Tax Rate)° 


Example:

Product A
Quantity: 1
Unit Cost: £5.00
Tax Rate: 20%
Line Total: 5.00 * 1 = £5.00
Line Tax: 5.00 - (5.00 / 1.2) = £0.83
Each (Ex Tax): 5.00 / 1.2 = £4.17
  

Direct Orders

Direct Order unit costs can either be inclusive or exclusive of tax. This depends on your system settings under Settings > General Settings > General > Default tax settings > Direct orders tax is inclusive of the item price.


  • When ticked, the line totals will be calculated in the same method as for channel orders in the example above.
  • When unticked, they will be calculated as below:


Line Total = Unit Cost * Quantity * (1 + Tax Rate)° 

Line Tax = Unit Cost * Quantity * Tax Rate

Each (Ex Tax) = Unit Cost


Example:

Product A

Quantity: 1
Unit Cost: £5.00
Tax Rate: 20% 
Line Total: 5.00 * 1 * 1.2 = £6.00
Line Tax:  5.00 * 1 * 0.2 = £1.00
Each (Ex Tax)£5.00


Shipping tax:

The shipping tax is calculated based on the order destination country and the tax rate is taken from the Countries list (Settings > General Settings > Default Settings > Manage Countries).


The Shipping under Totals on an order displays shipping cost excluding tax. Calculated tax is then added to the Tax line under Totals.


Shipping = Shipping Cost / (1 + Tax Rate)° 

Shipping Tax = Shipping Cost - Shipping


Example

  • Order destination country is Belgium.
  • Belgium Tax Rate is specified as 21% in the Countries list.

Tax rate: 21%
Shipping Cost: £5.00
Shipping: 5.00 / 1.21 = £4.13
Shipping Tax: 5.00 - 4.13 =  £0.87



Discount:


The order discount is calculated backwards from the line total after removing the tax. This is the most accurate way of calculating accurate discount rates.


Line Total ex tax = Line Total / (1 + Tax Rate)° 

Discounted line total = (Line Total ex Tax - Line Total Ex Tax * Discount) * (1 + Tax Rate)°


Example:


Discount: 10%
Line Total: £15.00
Tax Rate: 20%
Line total Ex Tax: 15.00 / 1.2 = £12.50
Discounted line total: (12.50 - 12.50 * 0.1) * 1.2 = £13.50


° (1 + Tax Rate) refers to when it is needed to use a value of 1 + the tax rate in decimal values e.g. with Tax Rate 20% you would need to divide or multiply by 1 + 0.2 i.e. 1.2, with Tax Rate 9% it would be 1 + 0.09 i.e 1.09