Pricing With & Without Tax

Display product prices without tax, then add applicable taxes at checkout based on the customer's location.

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How It Works

With tax-exclusive pricing, the price you set is the net price before tax. Bags calculates and adds the appropriate tax amount at checkout based on the customer's jurisdiction.

Example:

You set a product price of $100.00 with tax-exclusive pricing (default).

• Customer in US (no state sales tax): Pays $100.00 (Tax: $0)
• Customer in EU (20% VAT): Pays $120.00 (Price: $100.00 + VAT: $20.00)
• Customer in India (18% GST): Pays $118.00 (Price: $100.00 + GST: $18.00)

Different customers pay different total amounts based on their tax jurisdiction.

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Configuration

Tax-exclusive pricing is the default for all products in v0.

Product Settings

1. Navigate to Products in the dashboard
2. Select your product
3. Set the net price (before tax)

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Customer Experience

At Checkout:

• Customer sees base price: "$100.00"
• Tax is added during checkout: "+ $20.00 VAT"
• Total shown before payment: "$120.00"

Invoice:

• Subtotal: $100.00
• VAT (20%): $20.00
• Total: $120.00

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Merchant Impact

Consistent Net Revenue:

You receive the same net amount regardless of customer location:

• US customer pays $100.00 → you receive ~$100.00 (minus fees)
• EU customer pays $120.00 → you receive ~$100.00 (minus fees, tax remitted by Bags)

Predictable Margins:

Since your net revenue per sale is constant, profit margins are easier to forecast and maintain.

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When to Use Tax-Exclusive Pricing

Recommended for:

• B2B SaaS - Business customers expect tax-exclusive pricing
• US-focused products - Standard practice in the US is tax added at checkout
• Consistent margins - You want the same revenue per sale globally
• Enterprise products - Large customers often require tax-exclusive quotes

Not recommended for:

• European B2C - EU consumers expect final prices including VAT
• Premium consumer products - Psychological pricing ($99 vs $118.80) matters

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Display at Checkout

Depending on merchant preference, tax can be displayed:

Option 1: Lazy Loading (Common)

• Base price shown on product page
• Tax calculated and displayed when customer enters location or begins checkout

Option 2: Upfront (Transparent)

• Tax calculated immediately based on IP geolocation
• Total with tax shown from the start

Bags defaults to upfront display for better transparency.

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B2B Tax Handling

For business-to-business transactions:

VAT Reverse Charge (EU)

If customer provides a valid VAT ID:

• Base price: $100.00
• VAT: $0.00 (reverse charge applies)
• Total: $100.00

Customer is responsible for self-assessing and remitting VAT in their jurisdiction.

Tax Exemption Certificates

Some business customers (nonprofits, government, resellers) may be tax-exempt:

• Customer provides exemption certificate
• Tax: $0.00 (exempt)
• Total: $100.00

Bags validates and stores exemption certificates for compliance.

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Tax Calculation

Tax is calculated based on:

• Customer billing address - Primary method
• IP geolocation - Fallback if billing address not provided
• Product category - Digital goods, SaaS, or physical goods
• Local tax rules - VAT, GST, sales tax rates

Tax rates are updated automatically as regulations change.

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Choosing Between Tax-Inclusive and Tax-Exclusive

Recommendation:

If you're unsure, start with tax-exclusive pricing (default). It provides consistent revenue and is familiar to most markets. Tax-inclusive pricing will be available when the dashboard toggle ships — join updates via Pricing & Tax waitlist.

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What's next