What is the difference between fixed inclusive and exclusive tax within the pricing?
There are two kinds of pricing:
1- Universal pricing
When your net price is fixed and you deduct the tax amount.
2- Dynamic pricing
When your gross price is fixed and you add the tax amount.
You have to make this choice when you define your product pricing.
Here's an example
Take a simple case with a B2B seller.
1- Example of universal pricing (tax-inclusive)
When the customer chooses his country, Octobat deducts the right tax rate.
Net price = $10 (the amount paid by the customer, taxes included)
- For a french supplier selling in France (20%), gross price (tax excluded): $8.33 ($1.67 VAT)
- For a french supplier selling in Germany (0%), gross price (tax excluded): $10 ($0 VAT)
- For a San Antonio supplier (with a "nexus" in Texas) selling in the state of Texas (8.25%), gross price (tax excluded): $8.92 ($1.08 sales tax)
2- Example of dynamic pricing (tax-exclusive)
When the customer chooses his country, Octobat adds the right tax rate.
Gross price = $10 (tax excluded)
- For a french supplier selling in France (20%), net price (tax included): $12
- For a french supplier selling in Germany (0%), net price (tax included): $10
- For a San Antonio supplier (with a "nexus" in Texas) selling in the state of Texas (8.25%), net price (tax included): $10.83 ($0.83 sales tax)
But imagine a more complex situation with a B2C business (even a US business) which sells an e-service in the European Union. It should include the 28 EU taxes depending on the specific countries in which they are selling. (see our article about the 2015 January 1st rule)
How does Octobat handles that?
Octobat provides its own checkout (octobat-checkout.js) to allow you to choose either the dynamic or universal pricing.
Depending on the customer country, Octobat is able to detect and re-calculate prices using the right tax rate.
If you don't want the checkout solution and would like to customize your payment form, there is a JS library (octobat-custom-form.js) which allows you to choose between inclusive and exclusive tax thanks to the "data-taxes" attribute.
Sample code with the octobat-custom-form.js library:
<form method="POST" id="payment-form"
With these two options above, a form is generated and it deducts the net price.
After the payment, a charge or a subscription is generated in your payment solution with the right amount.
Payment integration and taxes are complicated, so the better solution is to let third-party solutions like <checkout /> to take care of it.