If you go over to Settings > Payment, the first option you’ll see is Taxes. Taxes are easy enough to set up, and come in two main types.
Additive: The standard American sales tax is an additive tax. Items with additive tax will have their price inflated at checkout. The price you set on these items is the price without tax.
Inclusive: European VAT would be an inclusive tax. When dealing with items with this tax type, the price you set on them is with tax.
When it comes to applying these taxes, you will be using Flags.
Think of Flags as kind of like labels. You might create a flag called “Has Tax”. The flag itself doesn’t do anything, but the system will use it to pair up different objects with different rules.
In the case of taxes, you create a tax, and give it a flag. Now when you want the system to apply that tax to a product or similar, you just need to give that product the same flag that you gave the tax.